INTERNATIONAL 

FINANCIAL 

REFORMS

U.S. and Other 

Jurisdictions’ Efforts 

to Develop and 

Implement Reforms

Report to Congressional Addressees

April 2014

GAO-14-261

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-261, a report to 

congressional addressees 

April 2014

INTERNATIONAL FINANCIAL REFORMS

U.S. and Other Jurisdictions’ Efforts to Develop and 

Implement Reforms

Why GAO Did This Study

Cross-border interconnections in the 

financial markets and other factors 

helped spread disruptions during the 

2007-2009 financial crisis and 

increased systemic risk. In response to 

the crisis, the G20 positioned itself as 

the main international forum for 

reforming financial regulations. In 

2008, the G20 leaders committed to 

implement a broad range of reforms 

designed to strengthen financial 

markets and regulatory regimes. 

In light of the G20’s reform efforts and 

the potential implications of the reforms 

for the United States, GAO examined 

(1) the U.S. role in the international 

financial reform efforts and (2) the 

implementation status of recent 

international financial reforms in the 

United States relative to other 

countries and challenges that uneven 

implementation may present. To 

address these issues, GAO reviewed 

and analyzed reports or other 

documents issued by the G20, FSB, 

IMF, and other international bodies 

since 2008 and studies on the G20 

reforms by academics, industry 

associations, and others. GAO 

reviewed the accuracy of U.S. 

responses to select questionnaires 

administered by FSB and asked other 

countries’ national audit offices to do 

the same for their regulators’ 

responses. Finally, GAO interviewed 

officials representing U.S. agencies, 

FSB Secretariat, IMF, industry 

associations, and academics.

GAO is not making any 

recommendations in this report.

What GAO Found

The United States has played an active role in helping to reform financial 

regulations to address weaknesses revealed by the 2007-2009 financial crisis. 

According to Treasury officials, during the acute phase of the crisis, the United 

States proposed elevating the Group of Twenty (G20) forum—representing 19 

countries (including the United States) and the European Union—from the level 

of finance ministers and central banks to the level of heads of state or 

government. In 2008, the U.S. President and other G20 leaders held their first 

summit in Washington, D.C., in part to establish a framework to help prevent 

financial crises. The G20 leaders established principles for financial regulatory 

reform and agreed on a series of financial reforms, which they have revised or 

expanded at subsequent summits. To implement their reforms, the G20 leaders 

generally have called on their national authorities—finance ministries, central 

banks, and regulators—and international bodies, including the Financial Stability 

Board (FSB) and standard setting bodies, such as the Basel Committee on 

Banking Supervision. In 2009, the G20 leaders established FSB to coordinate 

and promote implementation of the financial reforms, which typically involves 

standard setting bodies developing international standards (e.g., principles, 

policies, or guidance) and then jurisdictions voluntarily adopting rules or policies 

consistent with these standards, such as through legislation or regulations. As 

members of FSB and international standard setting bodies, U.S. federal 

authorities have actively helped formulate the standards that implement the G20 

reforms and cover, among other things, banking, derivatives, and hedge funds. 

The United States and other jurisdictions have made progress implementing 

many of the G20 financial reform commitments, but most reforms have not been 

fully implemented by all jurisdictions. FSB and standard setting bodies 

collaboratively monitor and report on the implementation status of the G20 

reforms. According to recent progress reports, the United States, like most FSB 

members, has implemented or is implementing G20 reforms that FSB designated 

as a priority based on their importance to global financial stability—including

higher capital standards, derivatives reforms, compensation practices, policy 

measures for systemically important financial institutions, and regimes for 

resolving failing financial institutions. However, implementation varies among 

jurisdictions. For example, according to a September 2013 progress report, only 

the United States reported having rules at least partly in effect to implement the 

G20 reforms requiring derivatives to be centrally cleared, traded on organized 

trading platforms, and reported to trade repositories, while many other 

jurisdictions reported having rules in effect for only some of these reforms or 

adopted or proposed legislation to implement the reforms. To promote and 

monitor the adoption of the international standards by each jurisdiction, such as 

to ensure a level playing field, FSB, the International Monetary Fund (IMF), and 

the Basel Committee have established programs to review and assess their 

members’ implementation of the standards. At the same time, legal, economic, 

and political factors can create implementation challenges for jurisdictions. For 

example, regulators in different jurisdictions may apply or interpret the standards 

differently. However, in some cases, inconsistent implementation of international 

financial standards could lead to certain activities migrating to less regulated 

jurisdictions (regulatory arbitrage) or adversely affect financial stability. 

View GAO-14-261. For more information, 

contact A. Nicole Clowers at (202) 512-8678 

or clowersa@gao.gov. 
Page i GAO-14-261 International Financial Reforms

Letter 1 

Background 3

United States Has Played an Active Role in International Financial 

Regulatory Reforms but Has Faced Challenges 16

United States and Other Jurisdictions Report Having Made 

Progress Implementing International Reforms, but Most 

Reforms Have Not Been Fully Implemented 23

Agency Comments and Our Evaluation 48

Appendix I Objectives, Scope, and Methodology 51

Appendix II The International Financial Architecture and International Bodies 53

Appendix III Reform Areas and Objectives of the Group of Twenty, Standards 

Developed by International Bodies, and U.S. Agencies’ 

Participation 56

Appendix IV Implementation Status of the Group of Twenty’s Reform 

Commitments Reported by Select Member Jurisdictions of the 

Financial Stability Board 62

Appendix V Comments from the Department of the Treasury 75

Appendix VI Comments from the Securities and Exchange Commission 76

Appendix VII GAO Contact and Staff Acknowledgments 78

Contents
Page ii GAO-14-261 International Financial Reforms

Tables

Table 1: Key Reform Areas Addressed by G20 Leaders 12

Table 2: Implementation Status of Basel Capital Framework as 

Reported by Members of the Basel Committee, as of 

October 2013 24

Table 3: Implementation Status of the G20 OTC Derivatives 

Reforms as Reported by FSB Member Jurisdictions, as of 

September 2013 28

Table 4: Select Features of Sector-Specific Regimes as Reported 

by FSB Member Jurisdictions, as of April 2013 32

Table 5: G-SIBs as of November 2013, Required Level of 

Additional Loss Absorbency, and Home Country 35

Table 6: Implementation Status of the G20 Financial Reform 

Commitments in the Nonpriority Areas as Reported by the 

United States and Other FSB Member Jurisdictions, as of 

August 2013 39

Table 7: G20 Reform Objectives, Selected International 

Standards, and U.S. Participation 57

Figures

Figure 1: Selected International Bodies Comprising the 

International Financial Architecture, as of January 2014 5

Figure 2: The G20-Initiated International Financial Reform 

Process 14

Figure 3: U.S. Federal Agencies’ Membership in Selected 

International Bodies 19

Figure 4: International Bodies Included in the International 

Financial Architecture 53

Figure 5: Country Profiles–China 64

Figure 6: Country Profiles–France 65

Figure 7: Country Profiles–Germany 66

Figure 8: Country Profiles–Italy 67

Figure 9: Country Profiles–Japan 68

Figure 10: Country Profiles–Netherlands 69

Figure 11: Country Profiles–Spain 70

Figure 12: Country Profiles–Sweden 71

Figure 13: Country Profiles–Switzerland 72

Figure 14: Country Profiles–United Kingdom (UK) 73

Figure 15: Country Profiles–United States (US) 74
Page iii GAO-14-261 International Financial Reforms

Abbreviations

Basel Committee Basel Committee on Banking Supervision

CFTC Commodity Futures Trading Commission 

CPSS Committee on Payment and Settlement Systems 

Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer 

 Protection Act

D-SIB domestic systemically important bank

FDIC Federal Deposit Insurance Corporation

Federal Reserve Board of Governors of the Federal Reserve System 

FSAP Financial Sector Assessment Program 

FSB Financial Stability Board 

FSOC Financial Stability Oversight Council 

GDP gross domestic product 

G-SIB global systemically important bank

G20 Group of Twenty

IADI International Association of Deposit Insurers 

IMF International Monetary Fund

IAIS International Association of Insurance Supervisors

IASB International Accounting Standards Board

IFRS International Financial Reporting Standards 

IOSCO International Organization of Securities 

 Commissions 

NAIC National Association of Insurance Commissioners

OCC Office of the Comptroller of the Currency

ODRG OTC Derivatives Regulators Group

OECD Organisation for Economic Co-operation and 

 Development

OLA Orderly Liquidation Authority

OTC over-the-counter

ROSC Reports on the Observance of Standards and 

 Codes

SEC Securities and Exchange Commission 

SIFI systemically important financial institution

Treasury Department of the Treasury

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Page 1 GAO-14-261 International Financial Reforms

441 G St. N.W.

Washington, DC 20548

April 3, 2014

The Honorable Maxine Waters

Ranking Member 

Committee on Financial Services

House of Representatives

The Honorable Shelley Moore Capito

Chairwoman

Subcommittee on Financial Institutions and Consumer Credit

Committee on Financial Services

House of Representatives

Cross-border interconnections in the financial markets and other factors 

helped spread disruptions in the global financial system during the 2007-

2009 financial crisis and increased systemic risk at the national and 

international levels. For example, the rise in the complexity and 

globalization of over-the-counter (OTC) derivatives contributed to 

economic growth but created interconnections that helped spread 

disruptions quickly across markets and borders during the crisis. These 

and other disruptions contributed to widespread losses in economic 

output and wealth across the globe. In the United States, the 2007-2009 

financial crisis was associated with large declines in economic output, 

household wealth, and other economic indicators.1 In response to the 

financial crisis, the United States and other countries undertook a variety 

of initiatives to stabilize and reform their financial systems. For example, 

in the United States, Congress passed the Dodd-Frank Wall Street 

Reform and Consumer Protection Act (Dodd-Frank Act), which includes a 

broad range of reforms intended to strengthen oversight of the financial 

services sector.2

At the international level, the U.S. President and leaders from other major 

jurisdictions positioned the Group of Twenty (G20) as the main 

 

1

See, for example, GAO, Financial Regulatory Reform: Financial Crisis Losses and 

Potential Impacts of the Dodd-Frank Act, GAO-13-180 (Jan. 16, 2013).

2

Pub. L. No. 111-203, 124 Stat. 1376 (2010).
 

Page 2 GAO-14-261 International Financial Reforms

international forum for reforming financial regulations.3 In 2008, the G20 

leaders held their first summit in Washington, D.C., and collectively 

committed to implement reforms designed to strengthen financial markets 

and regulatory regimes to avoid future financial crises. In doing so, the 

leaders acknowledged that regulation is first and foremost the 

responsibility of national regulators. But they also noted that the financial 

markets are global; thus, intensifying international cooperation, 

strengthening international standards, and implementing such standards 

consistently are necessary to help protect against adverse cross-border, 

regional, and global developments affecting international financial 

stability. Since 2008, the G20 leaders have met at least annually, in part 

to monitor progress and refine and expand their financial reform agenda. 

They generally have tasked their finance ministers and international 

bodies with implementing the agenda. In particular, the G20 leaders 

established the Financial Stability Board (FSB) as the successor to the 

Financial Stability Forum and made FSB responsible for coordinating and 

promoting the implementation of the G20 reform commitments.4

We prepared this report under the authority of the Comptroller General to 

conduct work on GAO’s initiative to assist Congress with its oversight 

responsibilities. In light of the G20’s efforts to reform financial regulations 

and the potential implications of such reforms for the United States, we 

examined the

• U.S. role in the international financial reform efforts, including the 

development of international financial standards, and

• implementation status of recent international financial reforms in the 

United States relative to other jurisdictions and challenges that any 

uneven progress may present.

 

3

The G20, established in 1999, is a forum for international cooperation on important 

issues of the global economic and financial agenda. Its members are Argentina, Australia, 

Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, 

Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States, and the 

European Union. See the background section of this report for a more detailed discussion

of the G20.

4

The Financial Stability Forum was founded in 1999 by the G7 finance ministers and 

central bank governors. In 2008 the G20 leaders called for a larger membership of the 

Financial Stability Forum and re-established it as FSB in 2009 with a broadened mandate 

to promote financial stability.
 

Page 3 GAO-14-261 International Financial Reforms

To address our objectives, we reviewed and analyzed declarations, 

surveys, and reports issued by the G20, FSB, International Monetary 

Fund (IMF), and other international bodies since 2008. We also reviewed 

and analyzed studies on the G20 reforms by academics, industry 

associations, and others. We reviewed the accuracy of U.S. responses to 

selected questionnaires administered by FSB or a standard-setting body 

and asked other countries’ national audit offices to do the same for their 

regulators’ responses. Finally, we interviewed officials representing U.S. 

authorities—the Board of Governors of the Federal Reserve System 

(Federal Reserve), Commodity Futures Trading Commission (CFTC), 

Department of the Treasury (Treasury), Federal Deposit Insurance 

Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and 

Securities and Exchange Commission (SEC)—FSB Secretariat, IMF, 

industry associations, and academics. Appendix I contains additional 

information on our scope and methodology.

We conducted this performance audit from March 2013 to April 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

Numerous international bodies with different missions and members have 

played a role in implementing the G20 financial regulatory reform agenda. 

In general, many of these bodies operate on a consensus basis and have 

no legally binding authority. Thus, financial reform agreements reached 

by these bodies must be adopted voluntarily by their member 

jurisdictions, such as through legislative or regulatory changes (or both), 

to take effect. Figure 1 depicts some of the international bodies involved 

in the G20 financial regulatory reforms and that partly comprise an

Background

The International Financial 

Architecture
 

Page 4 GAO-14-261 International Financial Reforms

international network often referred to as the “international financial 

architecture.”5

 

5

As discussed in appendix II, other international bodies not presented in figure 1 also are 

involved in helping to implement the G20 financial reform commitments and are part of the 

international financial architecture. 
 

Page 5 GAO-14-261 International Financial Reforms

Figure 1: Selected International Bodies Comprising the International Financial Architecture, as of January 2014

Note: This figure is not meant to be comprehensive but shows certain relationships and activities of 

selected international bodies involved in carrying out the reform agenda the G20 initiated in 2008.
 

Page 6 GAO-14-261 International Financial Reforms

Within the international financial architecture, the G20 is a forum for 

international cooperation on global economic and financial issues. Its 

members include 19 countries and the European Union. The G20’s 

objectives are to coordinate policy among its members to achieve global 

economic stability and sustainable growth; promote financial regulations 

that reduce risks and prevent future financial crises; and modernize the 

international financial architecture. The G20 was established in 1999 as a 

forum for finance ministers and central bank governors in the aftermath of 

the financial crisis of 1997-1998. The G20 was elevated to the political 

leader level in 2008, when its member countries’ heads of state or 

government first met to respond to the global economic and financial 

crisis.6

The G20 established FSB in 2009 as the successor to the Financial 

Stability Forum to coordinate at the international level the work of national 

financial authorities and international standard-setting bodies in order to 

develop and promote the implementation of effective regulatory, 

supervisory, and other financial sector policies. FSB member institutions 

include finance ministries, financial regulatory authorities, and central 

banks of the G20 members, as well as those of Hong Kong Special 

Administrative Region (SAR), the Netherlands, Singapore, Spain, and 

Switzerland. FSB members also include international bodies—such as 

IMF, the Organisation for Economic Co-operation and Development, and 

the World Bank—and international standard-setting bodies, such as the 

Basel Committee on Banking Supervision (Basel Committee), 

International Accounting Standards Board (IASB), International 

G20 member jurisdictions account for approximately 90 percent of 

world gross domestic product, 80 percent of world trade, and are home to 

two-thirds of the world’s population. Since 2008, the G20 leaders have 

met at least annually. The presidency of the G20 rotates annually among 

its members, and the host government supplies the staff for the 

secretariat that runs the agenda and hosts meetings that year. In addition 

to the G20 leaders meetings, the G20 finance ministers and central 

bankers, and the Sherpas, who are representatives of the leaders, meet 

on a regular basis. As the G20 operates on the basis of consensus, its 

commitments reflect the agreement of its members, including the United 

States.

 

6

Before 2008, the G20 was a finance minister/central bank governor-level body, while the 

political leaders of only the G7/G8 industrialized countries (Canada, France, Germany, 

Italy, Japan, the Russian Federation, the United Kingdom, and the United States) met 

regularly to discuss key economic issues. The G7/G8 has continued to meet regularly. 

G20

FSB
 

Page 7 GAO-14-261 International Financial Reforms

Organization of Securities Commissions (IOSCO), and International 

Association of Insurance Supervisors (IAIS).

According to FSB, it seeks to support the multilateral agenda for 

strengthening financial systems and the stability of international financial 

markets. FSB’s mandate includes (1) assessing vulnerabilities affecting 

the global financial system and identifying and overseeing actions needed 

to address them; (2) promoting coordination and information exchange 

among authorities responsible for financial stability; (3) undertaking 

reviews of the policy development work of the international standardsetting bodies to ensure their work is timely, coordinated, focused on 

priorities, and addressing gaps; and (4) collaborating with IMF to conduct 

early warning exercises. In addition, FSB has instituted a framework for 

monitoring implementation of the G20 financial reforms and reports 

periodically to the G20 about standards development and implementation 

progress.

Organizationally, a 70-person Plenary, composed of one to three 

representatives from each represented jurisdiction or organization, is the 

sole decision-making body of FSB. The Plenary approves reports, 

principles, standards, recommendations, and guidance developed by 

FSB, and approves work programs and the FSB budget. The FSB 

Plenary is led by the FSB Chairman. A Steering Committee coordinates 

work in between Plenary meetings. FSB’s work is carried out through the 

activities of standing committees, including the Standing Committee on 

Assessment of Vulnerabilities, the Standing Committee on Standards 

Implementation, and the Standing Committee on Supervisory and 

Regulatory Cooperation.7 The FSB Plenary is reviewing the structure of 

representation in FSB, which is to be completed by the next leaders 

summit in November 2014.8

 

7

Additional committees within FSB include a Standing Committee on Budget and 

Resources, the Resolution Steering Group, various working groups, and several Regional 

Consultative Groups. 

As outlined in the FSB charter, FSB Plenary 

seat assignments are meant to reflect the size of the national economy, 

financial market activity, and national financial stability arrangements in a 

member jurisdiction. The staff of FSB members carry out the majority of 

8

In a 2013 declaration, the G20 leaders supported FSB’s proposal to review the structure 

of its representation. 
 

Page 8 GAO-14-261 International Financial Reforms

FSB’s work. The FSB Secretariat has approximately 30 staff members 

who also support FSB’s work.

IMF is an organization of 188 member jurisdictions. Founded in 1944, 

IMF’s primary purpose is to safeguard the stability of the international 

monetary system—the system of exchange rates and international 

payments that enables countries (and their citizens) to buy goods and 

services from one another. IMF’s main activities include (1) providing 

advice to members on adopting policies that can help them prevent or 

resolve a financial crisis, achieve macroeconomic stability, accelerate 

economic growth, and alleviate poverty; (2) making financing temporarily 

available to members to help them address balance of payments 

problems; and (3) offering technical assistance and training to countries, 

at their request, to help them build the expertise and institutions they 

need to implement sound economic policies.

As part of its surveillance activities, IMF conducts surveillance of its 

members’ financial sectors at the bilateral and multilateral levels and 

research and analysis of macroeconomic and financial issues. A 

comprehensive and in-depth review of individual members’ and 

jurisdictions’ financial sectors is undertaken by the mandatory financial 

stability assessments (mandatory FSAs) or the Financial Sector 

Assessment Program (FSAP), while Article IV staff reports (and 

associated selected issue papers) cover financial sector issues at a 

higher frequency and often follow-up on mandatory FSA or FSAP 

recommendations. IMF’s multilateral surveillance appears in the form of 

regular reports, such as the Global Financial Stability Report, World 

Economic Outlook, Fiscal Monitor, and Spillover reports.9

 

9

Spillover reports examine the external effects of domestic policies in five systemic 

economies (China, the Euro area, Japan, the United Kingdom, and the United States). 

According to IMF, these reports, which underline the importance of financial links in 

spreading risk and analyze how policies in major economies impact financial markets, 

provide an added perspective to the policy line developed in bilateral discussions with 

each country, and serve as input into the Fund’s broader multilateral surveillance.

In recent years, 

IMF has worked with FSB and international standard-setting bodies to 

develop standards and guidance, to the extent those activities are 

consistent with its mandate. In addition to these activities, the G20 has 

tasked IMF and FSB with the responsibility for conducting early warning 

exercises, which typically take place twice a year, to assess risks to 

global financial stability.

IMF
 

Page 9 GAO-14-261 International Financial Reforms

The Basel Committee is the primary global standard-setter for the 

prudential regulation of banks and provides a forum for cooperation on 

banking supervisory matters. Established in 1975, it sets supervisory 

standards and guidelines to promote global financial stability. The 

standards have no legal force but are developed and issued by Basel 

Committee members, with the expectation that individual national 

authorities will implement them.10 The Basel Committee members include 

central banks or bank supervisors for 27 jurisdictions.11

IOSCO sets global standards for the securities sector to protect investors, 

ensure efficient markets, and address systemic risks. Its members include 

more than 120 securities regulators. It also has affiliated members, 

including 80 other securities markets participants (such as stock 

exchanges). Established in 1983, IOSCO develops, implements, and 

promotes adherence to internationally recognized standards for securities 

regulation. It works with the G20 and FSB to develop standards and 

guidance to implement the global regulatory reforms that apply to 

securities markets and institutions. IOSCO is a founder of the Joint 

Forum, along with the Basel Committee and IAIS. IOSCO also works with 

the Committee on Payment and Settlement Systems (CPSS) on reform 

efforts related to financial market infrastructures, including central clearing 

counterparties.

The Basel 

Committee expanded its membership in 2009, adding the financial 

authorities of Argentina, Hong Kong SAR, Indonesia, Saudi Arabia, 

Singapore, South Africa, and Turkey to its membership. With the G20’s 

support, the Basel Committee recently established a more active program 

to monitor members’ commitments to implement Basel Committee 

standards. The Basel Committee works with FSB, of which it is a 

member, and other international standard-setting bodies to address 

financial reform issues within its mandate. The Basel Committee is a 

sponsor organization of the Joint Forum, which also includes IOSCO and 

IAIS, and which coordinates work on issues of common concern.

 

10Basel Committee members are expected to implement the Basel standards at a 

minimum, but members may decide to go beyond the Basel standards.

11The Basel Committee’s members include organizations with direct banking supervisory 

authority and central banks from Argentina, Australia, Belgium, Brazil, Canada, China, 

France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, South Korea, 

Luxembourg, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, 

Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.

Basel Committee

IOSCO
 

Page 10 GAO-14-261 International Financial Reforms

IAIS is the international standard-setting body responsible for developing 

and assisting in the implementation of principles, standards, and other 

supporting material for the supervision of the insurance sector. 

Established in 1994, IAIS’s objectives are to promote effective and 

globally consistent supervision of the insurance industry; to develop and 

maintain fair, safe, and stable insurance markets; and contribute to global 

financial stability. Its members include insurance supervisors and 

regulators from more than 200 jurisdictions in approximately 140 

countries, including the United States.12

CPSS is a standard-setting body for payment, clearing, and securities 

settlement systems. Established in 1990, it also serves as a forum for 

central banks to monitor and analyze developments in domestic payment, 

clearing, and settlement systems. Its members include 25 central banks 

responsible for payment and settlement systems. CPSS is a member of 

FSB and cooperates with other groups, including IOSCO and the Basel 

Committee, to address issues of common concern.

Nongovernmental organizations 

and private sector entities also participate in IAIS activities as observers. 

As noted above, IAIS is a member of the Joint Forum.

IADI is the global standard-setting body for deposit insurers. IADI 

activities include developing principles, standards, and guidance to 

enhance the effectiveness of deposit insurance systems, methodologies 

for the assessment of compliance with its principles, standards, and 

guidelines, and facilitating assessment processes. IADI also provides 

guidance for establishing new—and enhancing existing—deposit 

insurance systems, and encourages international contact among deposit 

insurers and other interested parties. IADI has 73 member organizations 

from 71 countries. It recently worked with the Basel Committee to 

produce the Core Principles for Effective Deposit Insurance Systems, 

which was designated by FSB as one of the 12 key standards for sound 

financial systems.

 

12The U.S. representatives include the Federal Insurance Office (FIO) Federal Reserve, 

and National Association of Insurance Commissioners (NAIC), which represents 50 U.S. 

state insurance regulators, the District of Columbia, and 5 U.S. territories. FIO, an office of 

the U.S. Department of the Treasury, was established under the Dodd-Frank Act. It has 

the statutory authority to represent the United States at IAIS and to coordinate federal 

efforts and develop federal policy on prudential aspects of international insurance matters. 

NAIC has no right to vote and can only designate up to 15 NAIC members to be permitted 

to vote at any time. 

IAIS

CPSS

IADI
 

Page 11 GAO-14-261 International Financial Reforms

IASB is the standard-setting body of the IFRS Foundation, an 

independent, nonprofit, private sector organization working in the public 

interest. Established in 2001, IASB carries out the IFRS Foundation’s 

stated objective of developing a single set of high-quality, 

understandable, enforceable, and globally accepted accounting 

standards.13

Various jurisdictions also have formed informal coalitions to address 

specific multilateral financial issues. For example, according to U.S. 

regulatory officials who are involved in the group, the OTC Derivatives 

Regulators Group (ODRG) is an informal group of regulators in 

jurisdictions that account for the most significant derivatives activity 

around the world: Australia, Brazil, the European Union, Hong Kong SAR, 

Japan, Ontario and Quebec (Canada), Singapore, Switzerland, and the 

United States.

IASB members are responsible for the development and 

publication of International Financial Reporting Standards (IFRS). IASB 

members are independent experts, and the board is required to reflect 

geographical diversity. The IFRS Foundation also has as principal 

objectives promoting the use and rigorous application of IFRS; taking 

account of the reporting needs of emerging economies and small and 

medium-sized entities; and promoting and facilitating the adoption of 

IFRS through the convergence of national accounting standards and 

IFRS.

14 ODRG focuses more strategically than the committees 

and activities under FSB and IOSCO on addressing critical cross-border 

issues in the OTC derivatives markets. ODRG reports periodically to the 

G20 finance ministers and central bank governors about its progress in 

identifying and addressing cross-border regulatory issues.

The G20 leaders have committed to undertake a broad range of financial 

regulatory reforms since the 2007-2009 financial crisis. In 2008, the G20 

leaders established principles for financial regulatory reform and 

developed a list of initial reform commitments. Through the eight summits 

held between 2008 and 2013, the G20 leaders have revised and 

 

13IASB’s predecessor, the International Accounting Standards Committee, was founded in 

1973. 

14Securities are regulated at the province level in Canada.

IASB

Informal Groups

Overview of the G20 

Leaders’ Regulatory 

Reform Agenda and 

Implementation Process
 

Page 12 GAO-14-261 International Financial Reforms

expanded the areas covered by their reform agenda.15

Table 1: Key Reform Areas Addressed by G20 Leaders

Table 1 

summarizes the key sectors and functional areas covered by the G20 

financial reform commitments.

Reform area Summary G20 reform commitments

Banking Increase banks’ resilience to shocks by, among other things, raising capital 

requirements and introducing liquidity standards and a leverage ratio requirement. 

Strengthen banks’ risk management practices and deposit insurance regimes. 

OTC derivatives Standardized OTC derivative contracts should be traded on exchanges or electronic 

trading platforms, where appropriate, and cleared through central counterparties. OTC 

derivative contracts should be reported to trade repositories. OTC derivatives that are 

not cleared through a central counterparty should be subject to higher capital and 

margin requirements.

Compensation practices Reform compensation practices to support financial stability. 

Enhanced Supervision of Systemically 

Important Financial Institutions (SIFIs) and

Resolution Regimes

Define the scope of SIFIs and determine and enhance their appropriate regulation or 

oversight. Resolution regimes should ensure an orderly wind-down of SIFIs, with the 

overall goal of reducing the moral hazard of SIFIs (ending “too big to fail”). a

Shadow banking Expand the regulatory perimeter, including strengthening the regulation and oversight 

of shadow banking, and focusing on regulatory gaps and risks.

Hedge funds Establish registration, appropriate disclosures, and oversight of hedge funds. Establish 

international information sharing framework and enhance counterparty risk 

management.

Securitization Improve risk management for securitization, strengthen supervisory requirements or 

best practices for investment in structured products, and enhance disclosure of 

securitized products.

Macroprudential frameworks and tools Establish a regulatory framework for macroprudential oversight, which includes 

enhanced systemwide monitoring and the use of macroprudential instruments. 

Improve cooperation between supervisors and central banks.

Credit rating agencies Improve oversight, including registration of credit rating agencies; enforcing 

compliance and requiring changes to rating agency practices for managing conflicts of 

interest; and reducing reliance on credit ratings.

Accounting standards Convergence by key international accounting standards bodies.

Financial markets Undertake measures to address the risks posed by high frequency trading and “dark 

liquidity.” Enhance market integrity and efficiency, and enhance market transparency 

in commodity markets.

 

15To date, the G20 leaders have held eight summits: (1) November 2008 in Washington, 

D.C., United States; (2) April 2009 in London, United Kingdom; (3) September 2009 in 

Pittsburgh, United States; (4) June 2010 in Toronto, Canada; (5) November 2010 in Seoul, 

South Korea; (6) November 2011 in Cannes, France; (7) June 2012 in Los Cabos, 

Mexico; and (8) September 2013 in St. Petersburg, Russia. 
 

Page 13 GAO-14-261 International Financial Reforms

Reform area Summary G20 reform commitments

Consumer Protection Improve consumer finance protection related to issues such as disclosure, 

transparency, and education; protection from fraud, abuse and errors; and recourse 

and advocacy.

Source: GAO summary of G20 and FSB documents.

a

The G20 leaders generally have called on their national authorities—

along with FSB; standard setting bodies, such as the Basel Committee 

and IOSCO; and other bodies—to convert their broad financial reform 

commitments into more specific standards (including policies, principles, 

practices, or guidance).

FSB considers resolution regimes as part of a comprehensive “too-big-to-fail” framework to address 

risks posed by SIFIs. FSB notes that too-big-to-fail problems are when the threatened failure of a SIFI 

leaves public authorities with no option but to provide public funds to avoid widespread financial 

instability and economic damage.

16

 

16Although the G20 leaders generally have set the international regulatory reform agenda, 

FSB or standard setting bodies may first develop recommendations for policy reforms and 

then ask the G20 leaders or G20 finance ministers and governors to endorse the 

recommendations as part of the reform agenda.

Although the standards are developed under 

the auspices of FSB or standard setting bodies (or both), the work of 

many of these entities largely is carried out by staff of finance ministries, 

central banks, and financial sector regulators of the member jurisdictions. 

Because international standards are not legally binding, individual 

countries or jurisdictions must voluntarily adopt them, such as through 

legislative or regulatory changes, or both, for the standards to take effect. 

For example, a jurisdiction may need to pass legislation and adopt 

regulations to implement one standard but only a regulation to implement 

another standard. In that regard, the legal and practical abilities of the 

G20 leaders to commit to legal and regulatory changes can vary widely, 

depending on the structure of the regulatory system in their jurisdictions 

(i.e., whether there are independent regulatory agencies) and on the 

nature of the relationship between the executive and legislative branches 

in their jurisdictions. Figure 2 illustrates this multistep process.
 

Page 14 GAO-14-261 International Financial Reforms

Figure 2: The G20-Initiated International Financial Reform Process

Although the G20 is serving as the main forum at the international level 

for reforming financial regulations, some academics have questioned the 

reliance on the G20 and other international bodies to reform international 

financial standards, citing various potential challenges with the current 

approach. For example, some maintain that international financial 

standards existed before the 2007-2009 financial crisis and were intended 

to reduce systemic risk but failed to prevent or mitigate the recent crisis.17

 

17For example, see Howard Davies, “Global Financial Regulation after the Credit Crisis,” 

Global Policy, vol. 1, no. 2 (May 2010) and Mario Giovanoli, “Reform of the International 

Financial Architecture after the Global Crisis,” N.Y.U. Journal of International Law and 

Policy, vol. 42 (2009-2010).

However, U.S. regulators and others have pointed to gaps or weaknesses 

in the international framework or standards that existed before the crisis 

and that the G20 reforms are intended to address. Additionally, some 

academics have questioned the potential effectiveness of international 

financial agreements or standards, arguing that their informal and 

nonbinding nature allows members to suffer limited consequences for 

noncompliance. In contrast, they also note that the informal approach 

influences behavior, with many governments adopting international 

financial standards into domestic law, or maintain that a formal approach 

to enforcement would not necessarily be more effective and could raise 
 

Page 15 GAO-14-261 International Financial Reforms

domestic sovereignty issues.18 Finally, some academics have commented 

that FSB’s limited and skewed geographic membership—despite its 

expansion to include some emerging countries—still may affect 

perceptions about its legitimacy.19 However, FSB’s charter includes 

provisions for FSB to consult with nonmembers on strategic plans, 

principles, standards, and guidance, and to allow nonmembers to 

participate, on an ad hoc basis, in its working groups and committee 

meetings. As discussed earlier, FSB has a work plan to review the 

structure of its representation, which is to be completed by the November 

2014 summit.

Congress passed the Dodd-Frank Act in 2010 in response to the 

regulatory and oversight weaknesses identified after the 2007-2009 

financial crisis. As summarized on the Senate Banking Committee’s 

website, the act seeks to (1) address risks to the stability of the U.S. 

financial system, in part through the creation of the Financial Stability 

Oversight Council (FSOC), (2) end too-big-to-fail bailouts of large, 

complex financial institutions, (3) increase transparency and regulation for 

certain complex financial instruments, and (4) strengthen protections for 

consumers and investors. The act requires federal agencies to issue 

hundreds of regulations to implement the act’s requirements. Regulators 

have proposed many of the rules, but many of the Dodd-Frank Act 

rulemakings had yet to be finalized as of December 2013.20 As discussed 

later in this report, many of the Dodd-Frank Act’s provisions are similar to 

the international financial reform commitments agreed to by the G20 

leaders.

 

18See, for example, Chris Brummer, “How International Financial Law Works (and How It 

Doesn’t),” 99 Geo. L.J. 257 (2011), and Stavros Gadinis, “The Financial Stability Board: 

The New Politics of International Financial Regulation,” 48, Tex. Int’l L. J. 157 (2013), and 

Douglas W. Arner, and Michael W. Taylor, “The Global Financial Crisis and the Financial 

Stability Board: Hardening the Soft Law of International Financial Regulation,” 32 U.New. 

S.Wales L. J. 488 (2009).

19See, for example, Garry J. Schinasi, and Edwin M. Truman, Reform of the Global 

Financial Architecture (2010). 

20See GAO, Dodd-Frank Regulations: Agencies Conducted Regulatory Analyses and 

Coordinated but Could Benefit from Additional Guidance on Major Rules, GAO-14-67 

(Washington, D.C.: Dec. 11, 2013).

The Dodd-Frank Act
 

Page 16 GAO-14-261 International Financial Reforms

The United States has been active in the international financial regulatory 

reforms intended to address regulatory and other weaknesses revealed 

by the 2007-2009 financial crisis. Through its participation in the G20, the 

United States has helped set the G20 financial regulatory reform agenda. 

Moreover, through their participation on various international bodies, U.S. 

financial regulators and, where relevant, Treasury have helped develop 

standards to implement the G20 reform agenda. However, U.S. financial 

regulators have faced challenges in implementing the G20 financial 

reform agenda.

The United States has played an important role in elevating the G20 

summits to the level of head of state (or government) and in setting G20 

agendas for reforming international financial regulation. According to 

Treasury officials, during the acute phase of the financial crisis in 2008, 

the United States proposed elevating the G20 forum from the traditional 

level of finance ministers and central banks to the level of heads of state 

or government. To that end, the G20 leaders, including the U.S. 

President, held a summit for the first time in Washington, D.C., in 

November 2008. The main objective for elevating the G20 forum was to 

help the world’s major economies cope with the then-ongoing financial 

crisis and establish a framework to help prevent future financial crises. 

Among other things, the G20 leaders established principles for financial 

regulatory reform and developed a list of initial reform commitments. The 

U.S. President has attended the subsequent G20 leaders’ summits and 

has continued to play an active role in helping to support or expand the 

G20 financial reform agenda. The G20 members’ finance ministers and 

central bankers also have been meeting regularly to advance the reform 

agenda.

In addition to the U.S. President’s direct participation in the G20 summits, 

the United States has helped to set the G20 financial reform agenda. For 

example, as host to the G20 summit in Washington (2008) and Pittsburgh 

(2009), U.S. officials were responsible for coordinating the preparation of 

the summit agendas and reform agreements. Agreements reached at the 

Pittsburgh summit included commitments by the G20 leaders to regulate 

the OTC derivatives markets and establish procedures to manage the 

failure of systemically important financial institutions. Moreover, U.S. 

officials have helped support and advance specific reform proposals for 

other summits. For example, in the lead-up to the London G20 summit in 

2009, the United States publicly supported increasing capital 

requirements for banks, creating FSB, and expanding the scope of 

regulation to systemically important institutions and markets. In the leadUnited States Has 

Played an Active Role 

in International 

Financial Regulatory 

Reforms but Has 

Faced Challenges

United States Has Helped 

Set the G20 Financial 

Regulatory Reform 

Agenda
 

Page 17 GAO-14-261 International Financial Reforms

up to the Toronto summit in June 2010, the United States reiterated its 

support for more stringent capital and liquidity requirements for banks. At 

the Toronto summit, leaders pledged to endorse the forthcoming capital 

reforms (i.e., the Basel III capital standards) at their summit in Seoul in 

November 2010.21

The United States also has been coordinating with international bodies 

and regulators to put in place domestic financial reforms. For instance, 

after the G20 summit in Seoul in November 2010, U.S. officials noted that 

the passage of the Dodd-Frank Act put the United States at the forefront 

of global financial reform. U.S. officials also highlighted that a number of 

the Dodd-Frank Act’s provisions aligned with the G20 reform 

commitments. These included provisions for (1) a resolution regime, (2) a 

framework of oversight and reporting for OTC derivatives markets, (3) 

regulation of all firms that pose the most risk to the financial system, and 

(4) a registration requirement for advisers to hedge funds.22 Further, the 

officials noted that the United States is working closely with the European 

Union and others to ensure that the G20’s agenda for regulatory reform is 

implemented.

The G20 leaders rely on their national authorities, FSB, and international 

standard setting bodies to implement their financial regulatory reform 

commitments. FSB and the standard setting bodies are membership 

organizations that rely substantially on finance ministries, central banks, 

and regulators from their member jurisdictions to help guide and carry out 

their work. Like the G20, FSB and many of the standard setting bodies 

follow a consensus-based decision-making process to develop their 

standards. U.S. banking regulators (FDIC, the Federal Reserve, and 

OCC), CFTC, SEC, and Treasury are members of FSB or standard 

setting bodies (or both) and, in some cases, have leadership roles, such 

as serving as committee chairs. Examples of international bodies in which 

U.S. authorities are members and have leadership roles include the 

following:

 

21Other U.S. priorities in the lead up to the Toronto summit included a restatement of 

support for stronger oversight of derivatives markets, more transparency and disclosure, 

and a more effective framework for winding down large global firms. 

22White House Fact sheet on the Seoul summit, available at 

http://www.whitehouse.gov/the-press-office/2010/11/12/g-20-fact-sheet-us-financialreform-and-g-20-leaders-agenda. 

United States Has Helped 

Develop International 

Financial Standards
 

Page 18 GAO-14-261 International Financial Reforms

• FSB: FSB coordinates implementation of the G20 financial reform 

agenda. The Federal Reserve, SEC, and Treasury serve on FSB’s 

Steering Committee and Plenary, which is FSB’s decision-making 

body. These agencies also chair or are members of three key 

standing committees and, with CFTC, FDIC, the Federal Reserve 

Bank of New York, and OCC, have participated in or chaired other 

FSB working groups. 

• Basel Committee: The Basel Committee develops prudential 

standards for banks. FDIC, the Federal Reserve, and OCC are 

members of the Basel Committee. OCC chairs one of two key 

subcommittees—the Supervision and Implementation group. FDIC 

officials noted that the agency chairs a task force exploring options to 

improve the simplicity and comparability of the capital framework.

• IOSCO: IOSCO sets global standards for the securities sector. SEC 

and CFTC have served in leadership roles in IOSCO and informal 

groups. For example, SEC and CFTC are both members of the 

IOSCO Board. In addition, CFTC and SEC co-chaired an IOSCO OTC

derivatives task force that established standards for mandatory 

clearing. CFTC also co-chairs a separate IOSCO committee on 

commodity derivatives.

• CPSS: CPSS sets global standards for payment, clearing, and 

securities settlement systems. The Federal Reserve and Federal 

Reserve Bank of New York are members of CPSS. They have 

participated in a number of CPSS and CPSS-IOSCO efforts, including 

the development of risk management standards for financial market 

infrastructures.

• IAIS: IAIS sets global standards for the insurance industry. The U.S. 

Treasury’s Federal Insurance Office chairs an IAIS committee that 

leads the development of prudential standards. The Federal 

Insurance Office also has served in leadership roles and as a member 

of other IAIS committees, subcommittees, and working groups.

• IADI: IADI sets global standards for deposit insurers. The FDIC is an 

active member of IADI, sits on its Executive Council, and chairs and 

participates in a number of IADI committees, subcommittees, and 

working groups.

Figure 3 shows which U.S authorities are members of selected 

international bodies (as represented by the solid lines). Although CFTC, 
 

Page 19 GAO-14-261 International Financial Reforms

FDIC, and OCC are not members of FSB, they have participated in or 

chaired FSB working groups (as represented by the dashed lines).

Figure 3: U.S. Federal Agencies’ Membership in Selected International Bodies

a

As members of FSB and international standard setting bodies, U.S. 

financial regulators and Treasury have been actively involved in 

developing many of the international financial standards (including 

policies, principles, practices, or guidance) that implement the G20 

financial reform commitments. Since 2008, FSB and international 

standard setting bodies have developed an array of new or revised 

standards covering a broad range of issues including banking, OTC 

derivatives, compensation practices, shadow banking, and SIFIs and 

resolution regimes. (See appendix III for a more detailed list of reform 

areas and objectives, related standards, and the participation of U.S. 

agencies.) Examples of standards that U.S. authorities helped develop 

include the following:

CFTC, FDIC, and OCC are not members of FSB but participate in selected FSB activities.

• Basel capital standards: FDIC, the Federal Reserve, Federal 

Reserve Bank of New York, and OCC, as U.S. representatives to the 

Basel Committee, helped develop the Basel III capital standards, 
 

Page 20 GAO-14-261 International Financial Reforms

which set higher levels for capital requirements for banks and 

introduced a new global liquidity standard.23

• OTC derivatives reforms: CFTC, the Federal Reserve, or SEC 

helped develop standards issued by IOSCO or CPSS (or both) for 

financial market infrastructures, central clearing of OTC derivatives, 

and reporting of OTC derivatives.

The Basel Committee 

released Basel III in December 2010, in part in response to the G20 

leaders’ calls for higher standards for capital and enhanced 

supervision.

24 These standards respond to the 

G20 leaders’ commitment in 2009 to ensure that all standardized OTC 

derivative contracts would be traded on organized platforms, where 

appropriate, and cleared through central counterparties; and all OTC 

derivatives contracts would be reported to trade repositories.25 CFTC, 

FDIC, the Federal Reserve, OCC, and SEC helped develop standards 

issued by the Basel Committee and IOSCO on margin requirements 

for non-centrally cleared OTC derivatives, as requested by the G20.26

 

23Basel Committee on Banking Supervision, Basel III: A Global Regulatory Framework for 

More Resilient Banks and Banking Systems (Basel, Switzerland: Dec. 2010). The Basel 

Committee issued a revised version of the requirements in June 2011.

24For example see Committee on Payment and Settlement Systems and Technical 

Committee of the International Organization of Securities Commissions, Principles for 

Financial Market Infrastructures (April 2012); Technical Committee of the International 

Organization of Securities Commissions, Requirements for Mandatory Clearing, OR05/12 

(February 2012); Committee on Payment and Settlement Systems and Technical 

Committee of the International Organization of Securities Commissions, Final Report: 

Report on OTC Derivatives Data Reporting and Aggregation Requirements (January 

2012); Technical Committee of the International Organization of Securities Commissions, 

Report on Trading of OTC Derivatives, FR03/11 (February 2011); and Technical 

Committee of the International Organization of Securities Commissions, Follow-On 

Analysis to the Report on Trading of OTC Derivatives, OR02/11 (January 2012). 

25FSB made recommendations in 2010 addressing practical issues that authorities may 

encounter in implementing the G-20 leaders’ OTC derivatives reform commitments. See 

Financial Stability Board, Implementing OTC Derivatives Market Reforms (Oct. 25, 2010). 

At their November 2010 Seoul summit, G-20 leaders endorsed the FSB 

recommendations. At their November 2011 Cannes summit, G20 leaders called on the 

Basel Committee and IOSCO to work together and with other relevant organizations to 

develop standards on margining for noncentrally cleared OTC derivatives.

26Basel Committee on Banking Supervision and Board of International Organization of 

Securities Commissions, “Margin Requirements for Non-Centrally Cleared Derivatives” 

(September 2013).
 

Page 21 GAO-14-261 International Financial Reforms

• Enhanced supervision of SIFIs and resolution regimes: FDIC, the 

Federal Reserve Bank of New York, and Treasury helped develop 

standards issued by FSB for resolution regimes. The regimes would 

help enable authorities to resolve failing financial firms in an orderly 

manner and without exposing the taxpayer to the risk of loss.27

According to FSB, these standards respond to a 2009 request by the 

G20 leaders to address too-big-to-fail problems associated with 

SIFIs—that is, when the threatened failure of a SIFI leaves public 

authorities with no option but to provide public funds to avoid 

widespread financial instability and economic damage.28 Moreover, 

the standards are part of a broader SIFI framework intended to reduce 

both the probability and impact of SIFIs failing.29

In our discussions with U.S. federal financial regulators, they identified 

time or resource constraints as key challenges in helping to develop 

international financial standards. One regulator said its staff members feel 

tension between allocating time to their routine regulatory duties and their 

international work. A U.S. regulator also said that since 2008, there has 

been a constantly increasing number of work streams, groups, and 

projects flowing from the G20, many with relatively short deadlines. 

Moreover, the number of overall projects tends to increase over time as 

old projects evolve into new areas and new projects are initiated. One of 

the regulators estimated that the number of projects had at least doubled 

since the start of the 2007-2009 financial crisis. Two of the regulators also 

told us they have faced resource constraints, such as not having the 

travel funds to attend meetings.

 

27Financial Stability Board, “Key Attributes of Effective Resolution Regimes for Financial 

Institutions” (October 2011).

28As we recently reported, U.S. government assistance to prevent the failures of certain 

large financial institutions during the 2007-2009 financial crisis helped avert a more severe 

crisis, but raised concerns about moral hazard and the appropriate scope of federal safety 

nets for the financial sector. Moral hazard can occur when market participants expect 

similar emergency actions in future crises, thereby weakening their incentives to properly 

manage risks. See GAO, Government Support for Bank Holding Companies: Statutory 

Changes to Limit Future Support Are Not Yet Fully Implemented, GAO-14-18 

(Washington, D.C.: Nov. 14, 2013).

29Financial Stability Board, Reducing the Moral Hazard Posed by Systemically Important 

Financial Institutions, FSB Recommendations and Time Lines (Oct. 20, 2010).

U.S. Challenges Involving 

the G20 Financial 

Regulatory Reforms
 

Page 22 GAO-14-261 International Financial Reforms

The number of members from any one country is intended to be 

representative of the size of national economies, financial market 

activities, and national financial stability arrangements. However, two U.S. 

regulators told us FSB’s selection of members has created additional 

coordination work for U.S. federal authorities. According to a U.S. 

regulator, U.S. membership in international bodies does not always reflect 

the significance of the U.S. economy. For example, while U.S. firms have 

a dominant share of the OTC derivatives markets, CFTC—one of the 

primary U.S. regulators responsible for overseeing derivatives markets—

has no representation on the FSB Plenary, the FSB decision-making 

body. As a result, U.S. regulators have had to devote time and effort 

coordinating input and responses from U.S. regulators not represented on 

FSB. Treasury officials told us that FSB must limit the number of 

representatives from any member jurisdiction to prevent its membership 

from becoming too unwieldy, but recognized that this limitation creates 

additional coordination work for U.S. financial regulators. Treasury staff 

told us that to address this limitation Treasury established a liaison, who 

coordinates closely and regularly with all U.S. financial regulators to keep 

them informed of FSB’s activities and work products and to obtain their 

input.
 

Page 23 GAO-14-261 International Financial Reforms

The United States and other jurisdictions report having made progress 

implementing the G20’s international financial reforms, but most reforms 

have not been implemented by all jurisdictions. Under its mandate, FSB is 

responsible for coordinating and promoting the monitoring of the 

implementation of the G20 reform commitments and reporting on the 

implementation progress to the G20. In collaboration with standard setting 

bodies, FSB established a framework in 2011 to monitor and report on 

the implementation of the G20 financial reform commitments, including 

the related international financial standards.30 In addition, FSB and IMF 

have programs to assess members’ compliance with international 

financial standards and foster a level playing field. However, a broad 

range of legal, economic, and political factors can create implementation 

challenges for jurisdictions. The failure to implement the international 

reforms consistently could, among other things, hinder the ability of 

national authorities or international bodies to protect against 

developments affecting national and international financial stability.

FSB has selected priority reform areas that undergo more intensive 

monitoring and detailed reporting than other reform areas, and the list of 

priority areas is reviewed annually by FSB and revised as needed.31 FSB 

selects the areas based on the importance of their consistent and 

comprehensive implementation to global financial stability. For each 

priority area, an FSB working group or standard setting body is 

responsible for monitoring implementation progress and periodically 

preparing a progress report.32

 

30Financial Stability Board, A Coordination Framework for Monitoring the Implementation 

of Agreed G20/FSB Financial Reforms (Oct. 18, 2011). In general, FSB’s implementation 

monitoring covers only the G20 financial reform commitments made in the aftermath of the 

global financial crisis.

Currently, FSB’s priority areas are (1) the 

Basel framework; (2) OTC derivatives market reforms; (3) policy 

measures for SIFIs; (4) resolution regimes, (5) compensation practices; 

31FSB’s Plenary determines the priority areas and reviews those areas annually in light of 

policy developments at the international level. FSB’s Standing Committee on Standards 

Implementation is responsible for proposing changes to the list annually.

32Under FSB’s coordination framework, such reports are to include information that (1) is 

collected and reported frequently, (2) provides regular country-by-country implementation 

details, (3) may be relevant for assessing implementation progress, (4) highlights issues 

and lessons of experience that implementation has raised for the authorities and market 

participants, and (5) provides potential recommendations to address major impediments 

to, or gaps in, implementation.

United States and 

Other Jurisdictions 

Report Having Made 

Progress 

Implementing 

International 

Reforms, but Most 

Reforms Have Not 

Been Fully 

Implemented

Jurisdictions Vary in Their 

Implementation Stage of 

the Priority Area Reforms
 

Page 24 GAO-14-261 International Financial Reforms

and (6) shadow banking.33

At their 2010 summit in Seoul, the G20 leaders endorsed Basel III capital 

standards and committed to adopt and implement the standards.

Based on recent progress reports, jurisdictions 

vary in their implementation stage of the priority area reforms.

34

According to the Basel Committee’s progress report issued in October 

2013, 11 of its 27 members had implemented in full the Basel capital 

framework, which includes Basel II, 2.5, and III standards (see table 2).35

Specifically, 12 jurisdictions reported that they had issued final Basel III 

capital rules that were legally in force. At that time, the United States and 

14 other jurisdictions reported that they had issued final rules to 

implement the Basel III capital standards, but the rules had not yet taken 

effect.36

Table 2: Implementation Status of Basel Capital Framework as Reported by 

Members of the Basel Committee, as of October 2013

The remaining member jurisdiction reported that a regulation on 

Basel III was to be issued in 2013.

Country or jurisdiction Basel II Basel 2.5 Basel III

Argentina

a

◐ ◐ ◐

Australia ● ● ●

Belgium ● ● ◐

 

33We do not report separately on the implementation progress for resolution regimes and 

shadow banking. First, we discuss implementation progress of resolution regimes but only 

for SIFIs. Second, FSB noted that progress for shadow banking will be reported once 

implementation is sufficiently under way. For the time being, FSB is reporting on those 

elements of shadow banking that already are under way under nonpriority areas (which 

we discuss in the following section).

34At their 2011 summit in Cannes, the G20 leaders called on jurisdictions to meet their 

commitment to implement fully and consistently Basel II and Basel 2.5 by 2011 and Basel 

III (starting in 2013, for completion by 2019). 

35Basel Committee on Banking Supervision, Progress Report on Implementation of the 

Basel Regulatory Framework (Basel, Switzerland: October 2013).

36The United States issued final and interim final Basel III rules in the summer of 2013 (78 

Fed. Reg. 62018 (Oct. 11, 2013) and 78 Fed. Reg. 55340 (Sept. 10, 2013)). The rules’ 

phase-in period for larger banking organizations began in January 2014, and the rule’s 

phase-in period for less complex banking organizations will not begin until January 2015. 

The Basel requirements include implementation of certain provisions by 2019, but the 

federal rules provide until 2021 for phasing in certain requirements, such as the 

percentage of nonqualifying capital instruments issued prior to September 12, 2010, 

includable in additional tier 1 or tier 2 capital.

Implementation of Basel III 

Standards
 

Page 25 GAO-14-261 International Financial Reforms

Country or jurisdiction Basel II Basel 2.5 Basel III

Brazil 

a

● ● ●

Canada ● ● ●

China ● ● ●

European Union ● ● ◐

France ● ● ◐

Germany ● ● ◐

Hong Kong SAR ● ● ●

India ● ● ●

Indonesia ● ○ ◐

Italy ● ● ◐

Japan ● ● ●

Luxembourg ● ● ◐

Mexico ● ◐ ●

Netherlands ● ● ◐

Russia ◐ ◐ ◐

Saudi Arabia ● ● ●

Singapore ● ● ●

South Africa ● ● ●

South Korea ● ● ◐

Spain ● ● ◐

Sweden ● ● ◐

Switzerland ● ● ●

Turkey ● ● ◐

United Kingdom ● ● ◐

United States ◐ ◐ ◐

● Implemented ◐Implementation ongoing○ Not implemented

Source: Basel Committee on Banking Supervision.

a

As previously discussed, although the Basel Committee members have 

adopted or will adopt rules to implement the Basel capital standards, the 

adoption of the standards does not necessarily ensure that they will be 

applied consistently across banks and jurisdictions. In that regard, the 

Basel Committee established the Regulatory Consistency Assessment 

Program in 2012. The committee monitors the transposition of Basel III 

standards into domestic regulations semiannually based on information 

provided by each of its member jurisdictions. The aim of such monitoring 

is to ensure that the internationally agreed timeline remains on track. The 

Basel Committee members agreed to implement Basel III from January 1, 2013, through January 1, 

2019, subject to transitional and phase-in arrangements.
 

Page 26 GAO-14-261 International Financial Reforms

committee publishes its results in regular progress reports (discussed 

earlier).

The Basel Committee also assesses the consistency of implementation of 

the Basel III standards. These assessments are done on a jurisdictional 

and thematic basis.

• Member jurisdictional assessments review the extent to which 

domestic Basel III regulations in each member jurisdiction are aligned 

with the Basel III standards. The assessments examine the 

consistency and completeness of the adopted standards, including 

the significance of any deviations in the standards, and provide an 

overall assessment of compliance using a four-grade scale: 

compliant, largely compliant, materially non-compliant, and 

noncompliant. As of year-end 2013, the committee had completed 

seven jurisdictional assessments. In its assessments of Brazil, China, 

Switzerland, Singapore, and Japan, the committee found their rules 

generally to be compliant with the Basel standards. The committee 

conducted assessments of the European Union’s and United States’ 

proposed Basel III rules but did not assign them a grade because of 

the draft nature of the rules.37

• Thematic assessments review regulatory outcomes to ensure that the 

prudential ratios calculated by banks are consistent across banks and 

jurisdictions and predominantly reflect differences in risk rather than in 

practice. The committee initially focused its thematic assessments on 

analyzing how banks were weighing (or valuing) assets based on their 

risk level, because differences in the application of the Basel 

standards can lead to variations in the amount of capital banks have 

to hold. In that regard, the objective of the assessments generally has 

been to obtain a preliminary estimate of the potential for variation in 

risk-weighted assets across banks and highlight aspects of the Basel 

standards that contribute to this variation. The committee’s two 

 

37The Basel Committee’s assessment found the European Union’s proposed approach 

generally complied with 12 of the 14 key components of the Basel framework. See Basel 

Committee on Banking Supervision, Basel III Regulatory Consistency Assessment (Level 

2), preliminary report European Union (October 2012). The committee’s assessment 

found the United State’s proposed approach generally complied with 12 of the 13 key 

components. See Basel Committee on Banking Supervision, Basel III Regulatory 

Consistency Assessment (Level 2), preliminary report United States of America (October 

2012). A component for operational risk was not assessed, as it is not applicable in the 

United States.
 

Page 27 GAO-14-261 International Financial Reforms

assessments on this issue found considerable variation across banks 

in the average risk-weighted assets for market risk in the trading book 

and credit risk in the banking book.38

At the 2009 summit in Pittsburgh, the G20 leaders committed that all 

standardized OTC derivatives should be traded on organized trading 

platforms and centrally cleared; all OTC derivatives should be reported to 

a repository; and all noncentrally cleared OTC derivatives should be 

subject to higher capital requirements. At the 2011 summit in Cannes, the 

G20 leaders further agreed to require noncentrally cleared OTC 

derivatives to be subject to margin requirements—the posting of collateral 

to offset losses caused by the default of a derivatives counterparty. FSB 

and standard setting bodies, including the Basel Committee, CPSS, and 

IOSCO, have issued most of the standards needed to implement the G20 

OTC derivatives reforms.

Part of the variation was 

attributed to differences in supervisory practices or decisions. 

According to a Basel Committee Chairman, information from the 

studies is being used by national supervisors and banks to take action 

where needed, such as to improve consistency. The Basel Committee 

also plans to use the results as part of its ongoing policy work.

39

According to FSB’s sixth progress report on implementation of OTC 

derivatives market reforms issued in September 2013, over half of FSB’s 

19 member jurisdictions, including the United States, reported having 

proposed or enacted legislation to require OTC derivatives transactions to 

be centrally cleared, traded on organized trading platforms, and reported 

to trade repositories.40

 

38Basel Committee on Banking Supervision, Regulatory Consistency Assessment 

Programme Analysis (RCAP): Risk-weighted Assets for Credit Risk in the Banking Book

(July 2013), and Regulatory Consistency Assessment Programme (RCAP): Analysis of 

Risk-weighted Assets for Market Risk (January 2013; revised February 2013). 

As shown in table 3, five jurisdictions, including the 

39See, for example, the Committee on Payment and Settlement Systems Technical 

Committee International Organization of Securities Commissions, Principles for Financial 

Market Infrastructures (April 2012); Committee on Payment and Settlement Systems

Technical Committee of the International Organization of Securities Commissions, Final 

Report: Report on OTC Derivatives Data Reporting and Aggregation Requirements

(January 2012); and Basel Committee on Banking Supervision and Board of the 

International Organization of Securities Commissions, Margin Requirements for 

Noncentrally Cleared Derivatives (September 2013).

40Financial Stability Board, OTC Derivatives Market Reforms, Sixth Progress Report on 

Implementation (Sept. 2, 2013). FSB has 24 member jurisdictions but treats the European 

Union members as one jurisdiction in this instance.

Implementation of the OTC 

Derivatives Reforms
 

Page 28 GAO-14-261 International Financial Reforms

United States, reported having proposed or enacted legislation to 

implement the margin requirements. Table 3 also shows that the United 

States is the only jurisdiction with regulations in force and operating for 

the central clearing, organized platform trading, and trade reporting 

requirements (for at least part of the market), but many jurisdictions 

reported having adopted regulations for the trade reporting requirement. 

Only one jurisdiction reported having adopted regulations for the margin 

requirement. According to FSB, the schedule for further changes in 

legislative and regulatory frameworks is uneven across jurisdictions and 

commitment areas.

Table 3: Implementation Status of the G20 OTC Derivatives Reforms as Reported by FSB Member Jurisdictions, as of 

September 2013

Status of legislation Status of regulation

Jurisdiction

Central 

clearing

Exchange 

or platform 

trading

Reporting 

to trade 

repository Margin

Central 

clearing

Exchange 

or platform 

trading

Reporting 

to trade 

repository Margin

Argentina ○ ○ — — ○ ○ — —

Australia ○ ○ ○ — / — ◐ —

Brazil — — ○ — — — ● —

Canada ○ ○ ○ — — — / —

China + ○ ○ — + ○ ○ —

European Union ○ + ○ ○ ○ — ○ —

Hong Kong SAR + + + + — — ◐ —

India ○ ○ ○ ○ ○ ▢ ◐ ▢

Indonesia — ○ ○ — — ◐ ◐ —

Japan ○ ○ ○ — ● — ● —

Mexico NA NA NA NA / / / —

Russia ○ ○ ○ NA — — ○ —

Saudi Arabia NA NA NA NA — — ● —

Singapore ○ / ○ — — — / —

South Africa ○ ○ ○ ▢ — — / —

South Korea ○ — ○ — — — ● —

Switzerland / / ▢ / — — — —

Turkey ○ — ○ — — — — —

United States ○ ○ ○ ○ ◐ ◐ ◐ +

Legend:

— - No action NA - Not applicable + - Proposed / - Consultation

▢ - Partially adopted ○ - Adopted ◐ - Partially effective ● - Effective

Source: FSB.
 

Page 29 GAO-14-261 International Financial Reforms

Notes: “No action” means that no action has been taken to date. “NA” means not applicable in the 

jurisdiction (i.e., legislative changes or implementing rules may not be needed in certain jurisdictions). 

“Consultation” means that official documents have been published for public consultation. “Proposed” 

means draft legislation or regulations have been submitted through the appropriate process. “Partially 

adopted” means that final legislation or rules have been adopted for part of the relevant commitment 

area and are enforceable. “Adopted” means that final legislation or rules have been adopted by the 

appropriate bodies and are enforceable. “Partially effective” means regulations are in force and 

operating for a part of the market. “Effective” means that regulations are in force and operating. 

Although the G20 OTC derivatives reform commitments cover capital, our table omits implementation 

of the capital requirements, because the requirements generally are addressed by the Basel capital 

framework (discussed above).

In its progress report, FSB also noted that in light of the global nature of 

OTC derivatives markets, cross-border coordination was needed to avoid 

unnecessary duplicative, inconsistent, or conflicting regulations.41

While cross-border coordination issues persist, we reported in late 2013 

that CFTC and SEC took steps to coordinate with foreign authorities on 

several rulemakings related to Dodd-Frank swap reforms, which include 

clearing, exchange trading, and reporting requirements.

FSB 

plans to publish a progress report by April 2014 that provides, among 

other things, an updated assessment of reform implementation, including 

any remaining issues in the cross-border application of regulations.

42

The 2007-2009 financial crisis revealed weaknesses in the existing 

regulatory framework for overseeing SIFIs, which FSB defines as 

institutions of such size, market importance, and interconnectedness that 

their distress or disorderly failure could destabilize the financial system 

and result in severe economic consequences. According to FSB, when 

the threatened failure of a SIFI leaves public authorities with no option but 

to provide public funds to avoid financial instability and economic 

For example, 

CFTC issued many swap-related rules and noted that it coordinated with 

international bodies, such as the European Securities Markets Authority, 

European Central Bank, and regulators in the United Kingdom, Japan, 

Hong Kong SAR, Singapore, Sweden, and Canada. On the swap entities 

rule, CFTC and SEC staffs said that they participated in numerous 

conference calls and meetings with international regulators.

 

41FSB has conducted thematic peer reviews of compensation, risk disclosure practices, 

mortgage underwriting and origination practices, deposit insurance systems, risk 

governance, resolution regimes, and reliance on credit rating agencies. FSB plans to 

conduct a peer review on the extent to which OTC derivatives trades are being reported to 

trade repositories in 2014.

42GAO-14-67. 

Implementation of the G20 

Reforms for SIFIs
 

Page 30 GAO-14-261 International Financial Reforms

damage, the SIFI can be considered too big—or too important—to fail.43

The knowledge that this can happen could encourage SIFIs to take 

excessive risks (referred to as moral hazard) and may represent a large 

implicit public subsidy of private enterprise. At the Pittsburgh Summit in 

2009, G20 leaders called on FSB to propose measures to address the 

systemic and moral hazard risks associated with SIFIs. FSB developed a 

framework intended to reduce the probability and impact of SIFIs failing.44

Resolution Regimes

The SIFI framework recommends new international standards for national 

resolution regimes (called “Key Attributes of Effective Resolution Regimes 

for Financial Institutions”) and requirements for banks determined to be 

globally systemically important to have additional loss absorption capacity 

to reflect the greater risk they pose to the global financial system. At the 

2010 summit in Seoul, the G20 leaders endorsed the FSB’s SIFI 

framework.

In its April 2013 peer review report on resolution regimes, FSB reported 

that some of its member jurisdictions developed new or revised existing 

resolution regimes.45

 

43GAO is currently undertaking work on the economic benefits that the largest bank 

holding companies (those with more than $500 billion in total consolidated assets) have 

received as a result of actual or perceived U.S. government support. GAO has issued one 

of two reports on this topic. See 

For example, FSB noted that the United States has 

implemented a new resolution regime—referred to as Orderly Liquidation 

Authority (OLA)—aligned with FSB’s key attributes through its passage of 

the Dodd-Frank Act. OLA includes broad authorities to wind-up failing 

financial companies that meet certain systemic criteria. FSB also noted 

that Australia, Germany, Mexico, Netherlands, Spain, Switzerland, and 

the United Kingdom have amended their resolution regimes through 

GAO-14-18. A second report will address questions about 

whether the largest bank holding companies have received funding or other economic 

advantages as a result of expectations that the U.S. government would not allow them to 

fail. 

44Financial Stability Board, Reducing the Moral Hazard Posed by Systemically Important 

Financial Institutions, FSB Recommendations and Time Lines (Oct. 20, 2010).

45Financial Stability Board, “Thematic Review on Resolution Regimes,” Peer Review 

Report (Apr. 11, 2013).
 

Page 31 GAO-14-261 International Financial Reforms

legislative changes.46

In addition to legislative changes, FSB found that sector-specific regimes 

for restructuring or winding down financial firms exhibited a broad range 

of practices in terms of scope and authorities. According to FSB, this is to 

be expected, because the key attributes do not prescribe the specific form 

of the resolution regime as long as the regime is consistent with the key 

attributes. All FSB members, including the United States, reported that 

they have specific powers to restructure or wind up banks (or both) that 

are distinct from ordinary corporate insolvency (see table 4). However, 

the extent to which the resolution regimes also cover insurers, investment 

or securities firms, and financial market infrastructure varies across 

jurisdictions.

At the same time, FSB noted that many of its 

member jurisdictions need to take further legislative measures to 

implement the key attributes fully in substance and scope. In its report 

entitled Report on Progress and Next Steps Towards Ending Too-Big-ToFail (TBTF) issued in September 2013, FSB noted that it will coordinate 

with IMF, the World Bank, and international standard setting bodies to 

finalize a methodology to assess implementation of the key attributes at 

the national level for use by IMF and the World Bank in their Standards

and Codes Initiative (discussed later).

 

46For example, in Australia, legislation was enacted in 2008 and 2010 to strengthen the 

crisis resolution powers available to its financial regulator. In the Netherlands, the 

resolution framework was broadened to address the risks posed by systemically relevant 

banks. Following the financial crisis, the Spanish government strengthened the deposit 

insurance agency, which is able to provide financial support in resolution, and in June 

2009 created the Bank Resolution Authority to assist the reorganization of the banking 

industry. Similarly, following the financial crisis, the Swiss Banking Act was revised in 

2011 and 2012 to include specific requirements for systemically important banks and 

additional restructuring provisions. In December 2013, the European Parliament and EU 

member countries reached agreement on the Bank Recovery and Resolution Directive, 

and its implementation will be an important step towards implementation of the key 

attributes in EU member countries.
 

Page 32 GAO-14-261 International Financial Reforms

Table 4: Select Features of Sector-Specific Regimes as Reported by FSB Member Jurisdictions, as of April 2013

Jurisdiction

Authority to 

restructure and/or 

wind up banks?

Authority to 

restructure 

and/or wind up 

insurers? a

Authority to 

restructure and/or 

wind up securities 

or investment 

firms? a

Authority to 

restructure and/or 

wind up financial 

market infrastructures? a

Are there legal 

provisions or policies 

that mandate or 

strongly encourage 

cross-border 

cooperation of 

resolution authority? a

Argentina ✔ ✔ ✖ ✖ ✖

Australia ✔ ✔ ✖ ✖ ✔

Brazil ✔ ✔ ✔ ✖ ✖

Canada ✔ ✔ ✖ ✖ ✖

China ✔ ✔ ✔ ✖ ✖

France ✔ ✔ ✔ ✔ ✔

Germany

b

✔ ✔ ✖ ✔ ✔

Hong Kong SAR 

b

✔ ✔ ✖ ✖ ✔

India ✔ ✖ ✖ ✖ ✖

Indonesia ✔ ✖ ✖ ✖ ✔

Italy ✔ ✔ ✔ ✔ ✔

Japan

b

✔ ✔ ✖ ✖ ✔

Mexico ✔ ✔ ✖ ✖ ✖

Netherlands ✔ ✔ ✔ ✔ ✔

Russia

b

✔ ✔ ✔ ✔ ✖

Saudi Arabia ✔ ✔ ✔ ✖ ✖

Singapore ✔ ✔ ✖ ✖ ✖

South Korea ✔ ✔ ✔ ✖ ✖

South Africa ✔ ✔ ✖ ✖ ✖

Spain ✔ ✔ ✔ ✖ ✔

Switzerland ✔ ✔ ✔ ✔ ✔

Turkey ✔ ✔ ✔ ✖ ✖

United Kingdom ✔ ✔ ✔ ✔ ✔

United States ✔ ✔ ✔ ✔ ✔

✔ Yes

✖ No

Source: FSB.

a

Refers to powers for restructuring and/or winding up banks, insurers, securities or investment firms, 

and financial market infrastructures that are distinct from ordinary corporate insolvency proceedings. 

These powers are not necessarily aligned with those specified in key attribute 3 (resolution powers).

b

Only within the European Union.
 

Page 33 GAO-14-261 International Financial Reforms

Additionally, in its April 2013 peer review report on resolution regimes, 

FSB reported that the resolution regimes of most of its members neither 

require nor prohibit cooperation with foreign resolution authorities. FSB 

regards legal frameworks for cross-border cooperation as a key attribute 

of resolution regimes. According to FSB, eight jurisdictions have statutory 

provisions that explicitly empower or strongly encourage resolution 

authorities to cooperate with foreign authorities (Australia, Hong Kong

SAR, Indonesia, Japan, Spain, Switzerland, United Kingdom, and United 

States) while several others indicated that it is their policy to cooperate 

where possible.

In 2012, we reported that international coordination remains a critical 

component in resolving the failure of a large, complex financial company 

and that regulators have been taking steps to address this issue, 

including through their work with FSB.47 More recently, in a 2013 report, 

we examined the advantages and disadvantages of certain proposals to 

revise the U.S. Bankruptcy Code for financial company bankruptcies, 

including proposals to change the role of financial regulators in the 

bankruptcy process and the special treatment of qualified financial 

contracts, such as derivatives.48

 

47GAO, Bankruptcy: Agencies Continue Rulemakings for Clarifying Specific Provisions of 

Orderly Liquidation Authority, 

We recommended that FSOC should 

consider the implications for U.S. financial stability of changing the role of 

regulators and the treatment of qualified financial contracts in financial 

company bankruptcies. Although our recommendation continues to have 

merit, FSOC has not yet implemented the recommendation. FSB made 

related recommendations in its peer review on resolution regimes 

(discussed later)—namely designating a lead authority for resolving 

domestic entities of the same group and introducing powers to impose a 

GAO-12-735 (Washington, D.C.: July 12, 2012).

48GAO, Financial Company Bankruptcies: Need to Further Consider Proposals’ Impact on 

Systemic Risk, GAO-13-622 (Washington, D.C.: July 18, 2013).
 

Page 34 GAO-14-261 International Financial Reforms

temporary stay on the exercise of contractual acceleration or early 

termination rights in financial contracts, subject to suitable safeguards.49

Identification of Largest and Most Complex SIFIs

Complementing the resolution regime reforms, FSB, the Basel 

Committee, IAIS, and others have taken steps to reduce the probability of 

the failure of SIFIs in part by working to establish requirements aimed at 

increasing SIFIs’ capacity to absorb losses. In November 2013, FSB 

published its updated annual list of global systemically important banks 

(G-SIB), which generally comprise the largest and most complex 

internationally active banks.50 As shown in table 5, there were 29 G-SIBs 

headquartered in 11 countries: 8 in the United States; 4 each in France

and the United Kingdom; 3 in Japan; 2 each in China, Spain, and 

Switzerland; and 1 each in Germany, Italy, Netherlands, and Sweden. GSIBs are grouped into one of five buckets based on their systemic 

importance, which correspond to increasing levels of additional loss 

absorbency requirements. The requirements are to be updated shortly 

and implemented by jurisdictions and phased in from January 2016, with 

full implementation by January 2019.51

According to the Basel Committee’s August 2013 progress report, 

Canada and Switzerland have issued final regulations for G-SIBs and 

domestic systemically important banks (D-SIBs) and begun to enforce 

them.52

 

49 FSB’s Key Attributes of Effective Resolution Regimes recommends, among other 

things, that resolution authorities have the power to temporarily stay the exercise of early 

termination rights that may otherwise be triggered when a firm enters resolution. For 

example, under the Dodd-Frank Act’s provisions on Orderly Liquidation Authority, qualified 

financial contracts—financial agreements including securities and commodities contracts, 

forward contracts, and repurchase and swap agreements—are subject to a 1-day stay and 

counterparties cannot terminate their contracts until 5:00 p.m. on the day after FDIC 

begins its receivership. During this time, FDIC may have transferred the contract to a 

bridge financial company or repudiated (rejected) it. 

Ten of the Basel Committee members have issued final D-SIB 

50Financial Stability Board, 2013 Update of Group of Global Systemically Important Banks

(Nov. 1, 2013). 

51G-SIBs also are subject to resolution planning requirements and higher supervisory 

expectations for risk management functions, data aggregation capabilities, risk 

governance, and internal controls. 

52Basel Committee on Banking Supervision, Report to G20 Leaders on monitoring 

implementation of Basel III regulatory reforms, Bank for International Settlements (August 

2013). 
 

Page 35 GAO-14-261 International Financial Reforms

regulations that were not yet in force (South Africa and EU member 

states). The remaining member jurisdictions, including the United States, 

had not yet issued draft rules. At the time, U.S. regulators expected to 

issue a notice of proposed rulemaking for G-SIBs by year-end 2013.53

Table 5: G-SIBs as of November 2013, Required Level of Additional Loss 

Absorbency, and Home Country

As 

of February 2014, the U.S. regulators had not issued a rule proposal to 

implement regulation for the Basel Committee G-SIB risk-based capital 

surcharge framework.

G-SIB 

Required level of additional 

loss absorbency Home country a

HSBC 2.5 percent United Kingdom

JP Morgan Chase 2.5 percent United States

Barclays 2.0 percent United Kingdom

BNP Paribas 2.0 percent France

Citigroup 2.0 percent United States

Deutsche Bank 2.0 percent Germany

Bank of America 1.5 percent United States

Credit Suisse 1.5 percent Switzerland

Goldman Sachs 1.5 percent United States

Group Crédit Agricole 1.5 percent France

Mitsubishi UFJ FG 1.5 percent Japan

Morgan Stanley 1.5 percent United States

Royal Bank of Scotland 1.5 percent United Kingdom

UBS 1.5 percent Switzerland

Bank of China 1 percent China

Bank of New York Mellon 1 percent United States

BBVA 1 percent Spain

Groupe BPCE 1 percent France

Industrial and Commercial 

Bank of China Limited

1 percent China

ING Bank 1 percent Netherlands

 

53The Federal Reserve has issued several rules to enhance prudential standards for bank 

holding companies with $50 billion or more in total consolidated assets and nonbank 

financial companies FSOC has designated for supervision by the Federal Reserve. These 

rules apply to U.S. G-SIBs and D-SIBs. 
 

Page 36 GAO-14-261 International Financial Reforms

G-SIB 

Required level of additional 

loss absorbency Home country a

Mizuho FG 1 percent Japan

Nordea 1 percent Sweden

Santander 1 percent Spain

Société Générale 1 percent France

Standard Chartered 1 percent United Kingdom

State Street 1 percent United States

Sumitomo Mitsui FG 1 percent Japan

Unicredit Group 1 percent Italy

Wells Fargo 1 percent United States

Source: GAO analysis of FSB reports.

a

FSB and standard setting bodies also have been extending the SIFI 

framework to other institutions.

The additional loss absorbency requirements will be phased in starting in January 1, 2016.

54 First, in response to a request by the 

G20 leaders, FSB extended the G-SIFI framework to domestic 

systemically important banks. In October 2012, the Basel Committee 

issued its framework for dealing with such banks, which focuses on the 

impact that the distress or failure of banks will have on the domestic 

economy.55 Second, IAIS developed a methodology to identify global 

systemically important insurers.56 In July 2013, FSB, in consultation with 

IAIS and national authorities, identified nine insurers (including three U.S. 

insurers) as global systemically important insurers, which will be subject 

to a set of policy measures consistent with the SIFI framework.57

 

54In the United States, under the Dodd-Frank Act, FSOC is authorized to determine that a 

nonbank financial company’s material financial distress—or the nature, scope, size, scale, 

concentration, interconnectedness, or mix of its activities—could pose a threat to U.S. 

financial stability and that such company will be subject to supervision by the Federal 

Reserve and enhanced prudential standards. FSOC designated American International 

Group, Inc., General Electric Capital Corporation, Inc., and Prudential Financial, Inc., for

consolidated supervision by the Federal Reserve. We currently are examining FSOC’s 

designation process.

Third, 

FSB, in consultation with IOSCO, has developed draft methodologies to 

55Basel Committee on Banking Supervision, A Framework for Dealing with Systemically 

Important Banks (October 2012).

56International Association of Insurance Supervisors, Global Systemically Important 

Insurers: Initial Assessment Methodology (July 18, 2013).

57Financial Stability Board, Global Systemically Important Insurers and the Policy 

Measures That Will Apply to Them (July 18, 2013).
 

Page 37 GAO-14-261 International Financial Reforms

identify nonbank, noninsurance G-SIFIs, which were issued for public 

consultation in January 2014.

According to FSB’s second progress report issued in August 2013, all but 

two FSB jurisdictions (Argentina and Indonesia) have implemented FSB’s 

compensation principles and standards in their national regulation or 

supervisory guidance.58

According to FSB, several authorities noted that firms still were 

expressing some concerns about a level playing field with respect to 

jurisdictions that may not have fully implemented the principles and 

standards. At the same time, FSB noted that national authorities have yet 

to see any real evidence that the implementation of the principles and 

standards has impeded or diminished the ability of supervised institutions 

to recruit and retain talent. In 2012, FSB established the bilateral 

complaint handling process—a mechanism for national supervisors from 

FSB jurisdictions to bilaterally report, verify, and, if needed, address 

specific compensation-related complaints by financial institutions based 

on level playing field concerns. According to FSB, no firm had submitted a 

The principles and standards for significant 

financial institutions include having a board remuneration committee as 

an integral part of their governance structure, ensuring that total variable 

compensation does not limit institutions’ ability to strengthen their capital 

base, and providing annual reports on compensation to the public on a 

timely basis. In light of the implementation status, FSB concluded that 

national implementation of the principles and standards can be 

considered largely complete and noted that the focus now is on effective 

supervision and oversight of firms. In addition, the report noted that while 

good progress continues to be made, more work needs to be done by 

national authorities and firms to ensure that implementation of the FSB 

principles and standards is effectively leading to more prudent risk-taking 

behavior. The report also noted that there still is some way to go before 

the improvements in compensation practices can be deemed effective 

and sustainable, particularly given the practical challenges to embedding 

risk management in firms’ compensation practices.

 

58Financial Stability Board, FSB progress report: Implementing the FSB Principles for 

Sound Compensation (Aug. 26, 2013).

FSB’s Compensation 

Principles and Standards
 

Page 38 GAO-14-261 International Financial Reforms

complaint, as of August 2013. FSB plans to continue to monitor the 

implementation of the principles and standards.59

The United States and other FSB members reported that they have 

implemented or are in the process of implementing most of the G20 

financial reform commitments in the nonpriority areas. FSB generally 

monitors the implementation of the G20 reforms in the nonpriority areas 

less intensively—primarily through annual surveys of its members.60

Specifically, FSB’s 2013 survey of its members covered the G20 financial 

reform commitments in the nonpriority areas. The data are self-reported 

by FSB member jurisdictions, and FSB generally does not evaluate the 

survey responses to verify the accuracy or assess the effectiveness of 

implementation. Although the priority and nonpriority areas overlap in 

some areas, the reform commitments in the nonpriority areas cover a 

broader range of sectors and functions, including shadow banking, hedge 

funds, securitization, credit rating agencies, financial markets, and 

supervision.61

As shown on table 6, implementation of the G20 financial reform 

commitments varies by nonpriority reform area. All FSB members 

reported that they implemented or have been implementing 15 of the 

commitments. For example, all members reported making progress in 

implementing commitments to strengthen oversight of shadow banking, 

register hedge funds, regulate credit rating agencies, and enhance 

supervision, accounting standards, and financial consumer protection. In 

 

59FSB has conducted two peer reviews on compensation. See Financial Stability Board, 

“Thematic Peer Review on Compensation,” Peer Review Report (Mar. 30, 2010), and 

Financial Stability Board, “2011 Thematic Peer Review on Compensation,” Peer Review 

Report (Oct. 7, 2011). 

60For the G20 reform commitments in the nonpriority areas, implementation monitoring is 

undertaken by FSB’s Implementation Monitoring Network. In large part, FSB has 

monitored progress through annual surveys of its member jurisdictions, with the first 

survey completed in 2010. In some cases, standard setting bodies may collect and report 

implementation information to FSB. In its 2010 and 2011 surveys, FSB generally covered 

all of the G20 reform commitments. After adopting its coordination framework in 2011, 

FSB has sought to exclude from the survey the G20 reform commitments on its priority 

area list. 

61Shadow banking is a priority area, and FSB plans to report on the implementation of the 

reform commitments once implementation is sufficiently under way. In the interim, FSB 

included the G20 reform commitment on shadow banking in its 2013 jurisdictional survey.

United States and Other 

FSB Member Jurisdictions 

Reported That They Have 

Implemented or Are 

Implementing Most of the 

G20 Reform Commitments 

in the Nonpriority Areas
 

Page 39 GAO-14-261 International Financial Reforms

contrast, one or more FSB members reported no action to implement 11 

nonpriority commitments, which include strengthening supervisory 

requirements for investment in structured products, enhancing disclosure 

of securitized products, strengthening national deposit insurance 

arrangements, and enhancing market transparency in commodity 

markets.

Table 6: Implementation Status of the G20 Financial Reform Commitments in the Nonpriority Areas as Reported by the United 

States and Other FSB Member Jurisdictions, as of August 2013

G20 Financial Reform Areas and Objectives 

a

United 

States 

FSB 

members:

complete

Draft/

ongoing

No 

action N/A

Refining the regulatory 

perimeter

1. Review of boundaries of the regulatory 

framework including strengthening 

oversight of shadow banking

Complete 18 7 0 0 

Hedge funds 2. Registration, appropriate disclosures 

and oversight of hedge funds

Complete b 17 5 0 2 

3. Establishment of international 

information sharing framework

Draft 15 3 2 5 

4. Enhancing counterparty risk 

management

Complete 19 6 0 0 

Securitization 5. Improving the risk management of 

securitization

Complete 20 4 1 0 

6. Strengthening of regulatory and capital 

framework for monolines

N/A 3 5 0 17

7. Strengthening of supervisory 

requirements or best practices for 

investment in structured products

No Action 16 7 2 0 

8. Enhanced disclosure of securitized 

products

Complete 16 7 2 0 

Enhancing supervision 9. Consistent, consolidated supervision 

and regulation of SIFIs

Complete 18 7 0 0 

10. Establishing supervisory colleges and 

conducting risk assessments

Complete 16 3 0 6 

11. Supervisory exchange of information 

and coordination

Complete 20 4 0 1 

12. Strengthening resources and effective 

supervision

Complete 22 3 0 0 

Building and implementing 

macro-prudential 

frameworks and tools

13. Establishing regulatory framework for 

macro-prudential oversight

Complete 22 3 0 0 

14. Enhancing system-wide monitoring 

and the use of macro-prudential 

instruments

Draft 18 6 1 0 
 

Page 40 GAO-14-261 International Financial Reforms

G20 Financial Reform Areas and Objectives 

United 

States 

FSB 

members:

complete

Draft/

ongoing

No 

action N/A

15. Improved cooperation between 

supervisors and central banks

Complete 22 2 1 0 

Improving oversight of credit 

rating agencies

16. Enhancing regulation and supervision 

of CRAs

Complete 23 2 0 0 

17. Reducing the reliance on ratingsc

Enhancing and aligning 

accounting standards

18. Consistent application of high-quality 

accounting standards

Draft 23 2 0 0 

19. Appropriate application of Fair Value 

Accounting

Complete 19 6 0 0 

Enhancing risk management 20. Enhancing guidance to strengthen 

banks’ risk management practices, 

including on liquidity and foreign 

currency funding risks

Complete 19 6 0 0 

21. Efforts to deal with impaired assets 

and raise additional capital

Complete 17 5 1 2 

22. Enhanced risk disclosures by financial 

institutions

Complete 23 2 0 0 

Strengthening deposit 

insurance

23. Strengthening of national deposit 

insurance arrangements

Draft 10 10 2 3 

Safeguarding the integrity 

and efficiency of financial 

markets

24. Enhancing market integrity and 

efficiency

Draft 12 9 1 3 

25. Enhanced market transparency in 

commodity markets

Complete 10 9 3 3 

26. Legal Entity Identifier Complete 11 12 1 1 

Enhancing financial 

consumer protection

27. Enhancing financial consumer 

protection

Complete 15 10 0 0 

Source: FSB.

a

The data are self-reported by FSB member jurisdictions, and FSB generally does not evaluate the 

survey responses to verify the accuracy or assess the effectiveness of implementation.

b

United Kingdom did not submit a response.

c

Table 6 also shows the United States reported that it has taken action to 

implement all but one of the nonpriority G20 reform commitments—

strengthening of supervisory requirements or best practices for 

investment in structured products—and has completely implemented 19 

FSB did not collect information for its members on this G20 commitment, because it was conducting 

a thematic peer review on this issue.
 

Page 41 GAO-14-261 International Financial Reforms

of the 27 nonpriority reform commitments.62

Although the FSB survey data provide a broad picture of the 

implementation status of the G20 reform commitments in the nonpriority 

areas, the survey and its data have limitations. Importantly, the data are 

self-reported by FSB members. According to an FSB official, the FSB 

Secretariat has followed up bilaterally in a small number of cases to 

collect additional information and clarify certain responses, but FSB 

generally does not evaluate the survey responses to verify the accuracy 

or assess the effectiveness of implementation. As a result, the survey 

findings do not allow straightforward comparisons between jurisdictions or 

across reform areas. Also, some commitments are broadly defined and, 

to an extent, open to interpretation. For example, one reform commitment 

for hedge funds is enhancing counterparty risk management, and FSB 

reported that 19 members effectively implemented the reform. One of 

these members reported addressing the issue partly through an annual 

hedge fund survey; in contrast, another member reported adopting 

legislation and regulation to implement the reform. To interpret each G20 

reform commitment, FSB added a new field in its 2013 survey that 

identifies the international standard associated with a particular reform 

commitment.

Japan and South Korea 

reported being the furthest along—completely implementing 23 of the 27 

nonpriority commitments. Additionally, 21 of the 24 FSB member 

jurisdictions reported having completely implemented 16 or more of the 

nonpriority commitments.

While the Basel Committee conducts reviews of its members (discussed 

earlier), IMF and FSB also have programs to monitor the implementation 

of international financial standards and review the effectiveness of the 

supervision. These programs include IMF and the World Bank’s Financial 

Sector Assessment Program (FSAP) and Reports on the Observance of 

Standards and Codes (ROSC) assessments, as well as FSB thematic 

and country peer reviews.

FSAP provides the framework for comprehensive and in-depth 

assessments of a country’s financial sector. FSAP assessments gauge 

 

62The United States noted that the National Association of Insurance Commissioners has 

taken action to improve its process for assessing and valuing the credit quality of 

securitizations held by insurance companies.

IMF and FSB Conduct 

Reviews to Assess 

Implementation and 

Effectiveness of 

International Financial 

Reforms

IMF and the World Bank’s 

FSAP and ROSC
 

Page 42 GAO-14-261 International Financial Reforms

the stability of the financial sector and assess its potential contribution to 

growth.63 Historically, participation in FSAP has been voluntary, but in 

2010 IMF made financial stability assessments under FSAP a mandatory 

part of the surveillance for members with systemically important financial 

sectors.64 As of November 2013, IMF has identified 29 jurisdictions, 

including the United States, as having such a sector, in part based on the 

size and interconnectedness of each country’s financial sector.65

For the first time, the United States underwent an FSAP between 2009 

and 2010, when the Dodd-Frank Act was being deliberated and before it 

was enacted.

Similarly, following the 2007-2009 financial crisis, the G20 countries 

committed to undergo an FSAP every 5 years.

66

 

63FSAPs have two components: a financial stability assessment, which is IMF’s 

responsibility, and a financial development assessment in developing and emerging 

market countries, which is the World Bank’s responsibility. To assess financial stability, an 

FSAP examines the soundness of the banks and other financial institutions, conducts 

stress tests, rates the quality of financial regulation and supervision against accepted 

international standards, and evaluates the ability of country authorities to intervene 

effectively in case of a financial crisis. FSAP recommendations are of an advisory nature, 

but future FSAPs and other peer reviews assess the extent to which recommendations 

have been implemented.

The FSAP report discussed, among other things, the U.S. 

experience with and recovery from the recent financial crisis, factors that 

contributed to the crisis, and legislative actions being undertaken by the 

United States to reform its financial system. The report included a number 

of recommendations broadly intended to institutionalize and strengthen 

systemic risk oversight; redesign the regulatory architecture; strengthen 

64The mandatory financial stability assessments under an FSAP include an assessment of 

(1) the source, probability, and potential impact of the main risks to macro-financial 

stability in the near term, based on an analysis of the structure and soundness of the 

financial system and its inter-linkages with the rest of the economy; (2) the country’s 

financial stability policy framework, involving an evaluation of the effectiveness of financial 

sector supervision against international standards; and (3) the authorities’ capacity to 

manage and resolve a financial crisis should the risks materialize, looking at the country’s 

liquidity management framework, financial safety nets, crisis preparedness, and crisis 

resolution framework.

65The jurisdictions are Australia, Austria, Belgium, Brazil, Canada, China, Denmark, 

Finland, France, Germany, Hong Kong SAR, Italy, India, Ireland, Japan, Luxembourg, 

Mexico, the Netherlands, Norway, Poland, Russia, Singapore, South Korea, Spain, 

Sweden, Switzerland, Turkey, the United Kingdom, and the United States.

66International Monetary Fund, “United States: Publication of Financial Sector Assessment 

Program Documentation—Financial System Stability Assessment,” IMF Country Report 

No. 10/247 (Washington, D.C.: July 9, 2010).
 

Page 43 GAO-14-261 International Financial Reforms

micro-prudential regulation and supervision; strengthen oversight of 

market infrastructure; enhance crisis management, resolution, and 

systemic liquidity arrangements; and address too-big-to-fail issues and 

the future of the housing government-sponsored enterprises.67

IMF and the World Bank also have a program to assess member 

compliance with international financial sector standards, the results of 

which are summarized in a ROSC. IMF and the World Bank have 

recognized international standards in policy areas identified as key for 

sound financial systems and deserving of priority implementation in 

consideration of a country’s circumstances. The standards include those

developed by the Basel Committee, CPSS, IOSCO, IAIS, IADI, and IASB. 

These assessments are voluntary, even in jurisdictions for which an 

FSAP stability assessment is mandatory. ROSCs can be done on a 

stand-alone basis or as part of an FSAP. For example, the FSAP review 

of the United States included ROSCs covering international banking, 

securities, insurance, clearing, and settlement standards.

The report 

recognized that the Dodd-Frank Act was largely consistent with the FSAP 

recommendations but noted effective implementation would be key.

68 The 

assessment of the U.S. supervisory system against international codes 

identified many positive aspects but also some important shortcomings.69

FSB developed a peer review program in 2010. These reviews are part of 

FSB’s efforts to promote financial stability by developing strong 

regulatory, supervisory, and other financial policies and fostering a level 

 

67Housing government-sponsored enterprises include Fannie Mae and Freddie Mac, 

which were created by Congress as private, federally chartered companies to provide, 

among other things, liquidity to home mortgage markets by purchasing mortgage loans, 

thus enabling lenders to make additional loans. Given their precarious financial condition, 

Fannie Mae and Freddie Mac were placed in conservatorship in September 2008, with the 

Federal Housing Finance Agency serving as the conservator under powers provided in the 

Housing and Economic Recovery Act of 2008. 

68International Monetary Fund, “United States: Publication of Financial Sector Assessment 

Program Documentation— Reports on Observance and Codes,” IMF Country Report No. 

10/250 (July 2010).

69For example, the assessment found that (1) the multiplicity of regulators created 

challenges for systemic oversight, (2) consolidated regulation and supervision have fallen 

short of what is necessary for effective oversight of systemic groups, (3) weaknesses 

existed in the regulation and supervision of risk management, and (4) funding 

arrangements for supervisors were a concern, especially for SEC, CFTC, and the state 

insurance regulators. 

FSB’s Thematic and Country 

Peer Reviews
 

Page 44 GAO-14-261 International Financial Reforms

playing field. Under the FSB charter, member jurisdictions have 

committed to undergo periodic peer reviews. FSB’s peer program 

includes two types of reviews: thematic and country.

Thematic reviews focus on the implementation and effectiveness of FSBendorsed international standards deemed important for global financial 

stability. The objectives of the reviews are to encourage consistent crosscountry and cross-sector implementation, evaluate (where possible) the 

extent to which standards have had their intended results, and identify 

gaps and weaknesses in reviewed areas. As previously discussed, FSB 

has conducted thematic peer reviews in the priority reform areas, such as 

compensation and resolution regimes. It also has conducted peer reviews 

in nonpriority reform areas, including the following:

• The ongoing peer review on credit ratings was assessing FSB 

member progress implementing FSB’s Principles for Reducing 

Reliance on Credit Rating Agency Ratings.70

• The peer review on risk governance found that national authorities, 

since the crisis, have taken several measures to improve regulatory 

and supervisory oversight of risk governance at financial institutions. 

These measures include developing or strengthening existing 

regulation or guidance, raising supervisory expectations for the risk 

management function, engaging more frequently with the board and 

management, and assessing the accuracy and usefulness of the 

information provided to the board to enable effective discharge of their 

responsibilities.

The interim report 

identified several areas where accelerated progress is needed, 

including the need for FSB members to provide incentives to financial 

institutions to develop their own independent credit assessment 

processes. It also identified challenges that need to be addressed, 

which include reducing undue reliance on credit ratings in 

international standards, identifying suitable alternative standards of 

creditworthiness, and addressing constraints in the development of 

internal risk assessment systems.

71

 

70Financial Stability Board, Interim Report of the Peer Review of the FSB Principles for 

Reducing Reliance on Credit Rating Agency Ratings (Aug. 29, 2013).

It also made four recommendations targeting areas 

in which more substantial work was needed, including strengthening 

regulatory and supervisory guidance, reviewing principles for risk 

71Financial Stability Board, Thematic Review on Risk Governance (Feb. 11, 2013).
 

Page 45 GAO-14-261 International Financial Reforms

governance, and exploring ways to formally assess risk culture at 

financial institutions.

FSB’s country reviews focus on the implementation of international

standards and their effectiveness nationally. The reviews examine steps 

taken or planned by national authorities to address FSAP and ROSC 

recommendations of IMF and the World Bank. (FSB peer reviews take 

place 2 to 3 years following an FSAP.) Unlike an FSAP, an FSB country 

review does not comprehensively analyze a jurisdiction’s financial system 

structure or policies, or its compliance with international financial 

standards. According to an FSB official, both country and thematic peer 

reviews have the inherent limitation of being primarily “desktop-based” 

reviews, which constrains the review team’s ability to engage in on-site 

interactions to assess implementation progress, challenges, and impact. 

FSB’s peer review handbook notes that country peer reviews will include 

a brief on-site visit in the reviewed jurisdiction to meet with the authorities, 

and subject to the agreement of the reviewed jurisdiction, the on-site visit 

also may include meetings with relevant market participants.72

As part of this commitment, the United States volunteered to undergo a 

country peer review in 2013.

Such a 

visit should support the peer review’s objective and be consistent with 

equal treatment of members under the peer review process, and its 

expected benefits should outweigh the resource costs.

73

 

72Financial Stability Board, Handbook for FSB Peer Reviews (Jan. 7, 2014).

The review found that U.S. authorities had 

made good progress in following up on FSAP recommendations, 

particularly in regard to systemic risk oversight arrangements and the 

supervision and oversight of financial market infrastructures. At the same 

time, the review included recommendations targeted at systemic risk 

oversight arrangements, supervision and oversight of financial market 

infrastructures, and insurance supervision. For example, FSB 

recommended that FSOC develop a more systematic, analytical, and 

transparent macroprudential framework for coordinating efforts and 

incorporating the bottom-up views of member agencies to address 

systemic risk. In addition, FSB recommended that FSOC develop a more 

in-depth and holistic analysis of the systemic risks to financial stability. 

Similarly, in 2012, we reported that FSOC’s establishment of a Systemic 

Risk Committee to facilitate coordination among its member staffs can 

73Financial Stability Board, “Peer Review of the United States,” Peer Review Report (Aug. 

27, 2013).
 

Page 46 GAO-14-261 International Financial Reforms

help FSOC analyze known risks, but the approach does not take full 

advantage of FSOC member agency resources to identify new threats to 

the financial system. We also reported that FSOC identifies a number of 

potential emerging threats to financial stability in its annual reports, but 

does not use a systematic, forward-looking approach to identify such 

threats.74

While FSB noted that federal and state authorities in the United States 

began addressing FSAP recommendations on the insurance sector—for 

example, establishing the Federal Insurance Office—it also noted that 

significant additional work is needed. According to FSB, the structure and 

characteristics of insurance supervision in the United States—the 

multiplicity of state regulators, the absence of federal regulatory powers to 

promote greater regulatory uniformity, and the limited rights to preempt 

state law—constrain the federal government’s ability to ensure regulatory 

uniformity in this sector.

To address these weaknesses, we recommended, among other 

things, that FSOC develop (1) a monitoring approach that includes 

systematic sharing of key financial risk indicators across FSOC members 

and member agencies to assist in identifying potential threats for further 

monitoring or analysis; and (2) a more systematic, forward-looking 

approach for reporting on potential emerging threats to financial stability 

in annual reports. In its comment letter, Treasury stated that officials will 

carefully consider the report’s findings and recommendations. As of 

March 2014, Treasury had taken some steps to implement the 

recommendations, but the recommendations had not been fully 

implemented. 

75 FSB recommended that the U.S. authorities 

should promote greater regulatory uniformity in the insurance sector, 

including by conferring additional powers and resources at the federal 

level where necessary.

 

74GAO, Financial Stability: New Council and Research Office Should Strengthen the 

Accountability and Transparency of Their Decisions, GAO-12-886 (Washington, D.C.: 

Sept. 11, 2012).

75FSB noted that while the Federal Insurance Office represents the United States on 

international insurance matters and negotiates covered agreements, only the states have 

the authority (but are under no legal obligation) to implement laws that are consistent with 

those agreements and international standards agreed to within IAIS. 
 

Page 47 GAO-14-261 International Financial Reforms

As recognized by regulators, industry associations, and academics, a 

broad range of legal, economic, and political factors can create 

implementation challenges for jurisdictions. For example, differences in 

economic development of countries and differences in philosophy or 

ideology between jurisdictions can make it difficult for the international 

standards to be implemented consistently across jurisdictions. 

Representatives from one industry association told us that when standard 

setting bodies set narrow or detailed principles, such principles can 

become difficult to implement consistently because of jurisdictional 

differences. In addition, legislatures and industry groups may support 

more or less stringent requirements than called for by the standards. 

Finally, domestic regulators may apply or interpret the standards 

differently from other domestic regulators. As discussed previously, the 

Basel Committee’s thematic reviews found variation in the application of 

the capital standards across jurisdictions and partly attributed the 

variations to differences in supervisory practices.

As recognized by the G20 leaders, international bodies, industry 

associations, and others, the failure to implement the international 

financial standards consistently across jurisdictions could have a number 

of negative consequences. Most importantly, such inconsistencies could 

hinder or weaken the ability of national authorities or international bodies 

to protect against developments affecting national and international 

financial stability and help prevent or mitigate future financial crises. 

Moreover, a regulator stated that inconsistent implementation could lead 

to an unlevel playing field for financial institutions or regulatory arbitrage. 

For example, financial markets or services could migrate to less-regulated 

or unregulated jurisdictions. It also could impose a variety of avoidable 

costs on financial institutions with negative consequences for customers, 

investors, and national and global economies. For example, financial 

institutions operating in multiple jurisdictions could be subject to 

conflicting or duplicative rules and, thus, higher compliance costs.

Some academics and industry associations also have noted that 

complete global consistency across all financial regulations is not 

necessarily possible or preferable. Two academics suggest that if 

jurisdictions face significant limitations in their ability to reach agreement, 

harmonization efforts might lead to agreement on only weak global 

Jurisdictional Differences 

and Other Factors May 

Create Implementation 

Challenges for the G20 

Financial Reforms
 

Page 48 GAO-14-261 International Financial Reforms

standards.76 An academic we interviewed said that harmonized 

regulations across all jurisdictions may provide a level playing field but 

could be problematic, in part by not providing jurisdictions with the 

flexibility to respond to their differences. He also said that standardizing 

regulations could cause financial institutions to behave in the same way 

and unintentionally concentrate risk (e.g., holding the same types of 

assets). Similarly, an industry association noted that international 

consistency does not require uniformity but an appropriate level of 

similarity, comparability, and predictability of regulatory outcomes across 

jurisdictions.77 According to the association, international consistency also 

means striking a balance between consistency and the need for sensible 

local differences and supervisory discretion. In light of the potential for 

inconsistent implementation in areas that may result in unnecessary 

negative consequences, the review programs operated by FSB, IMF, and 

international standard-setting bodies likely will play an important role in 

addressing this issue. Indeed, some academics and industry associations 

view FSB’s peer reviews as an important mechanism for monitoring and 

encouraging compliance with international financial standards. Moreover, 

one academic suggests that the reviews may help deepen commitment to 

the standards by domestic officials by holding member jurisdictions 

accountable not only to an international body but also to each other. 

However, some express concern about the potential effectiveness of FSB 

peer reviews, in part because any of their recommendations, like the 

international financial standards, are not binding.

We provided a draft of this report to CFTC, FDIC, FSB, the Federal 

Reserve, IMF, OCC, SEC, and Treasury, for their review and comment.

All of the agencies except for the Federal Reserve provided technical 

comments, which we have incorporated, as appropriate. Treasury and 

SEC provided written comments that we have reprinted in appendixes V 

and VI, respectively. 

In commenting on our draft report, Treasury noted that the G20, FSB, and 

international standard-setting bodies have been cooperating since the 

 

76See, for example, Stephane Rottier and Nicolas Veron, “Not All Financial Regulation Is 

Global,” Bruegel Policy Brief, Issue 2010/07 (August 2010).

77Institute of International Finance, Promoting Greater International Regulatory 

Consistency (June 2013). 

Agency Comments 

and Our Evaluation
 

Page 49 GAO-14-261 International Financial Reforms

financial crisis on advancing the international financial reform agenda and 

strengthening the global financial system. Treasury further noted that the 

United States has played a leadership role in designing and implementing 

this agenda. Finally, Treasury agreed with the report that international 

reform efforts are not complete. Treasury noted that it would continue to 

work with other regulators to forge high-quality, compatible rules, 

encouraging reforms in other jurisdictions as strong as those in the United 

States, and would continue to promote greater consistency and 

convergence. 

SEC noted that it welcomed GAO's review of the international reform 

efforts and valued GAO’s perspective in this area. SEC stated that the 

report correctly notes that international standards are not legally binding 

and rely on the decision of national authorities to implement the standards

(reflecting, among other considerations, appropriate respect for national 

sovereignty). SEC also noted that it was pleased that the report 

acknowledges that while negative consequences can flow from varying 

degrees of implementation of international standards, there also can be 

good reasons behind such differences, such as avoiding a movement to 

less robust standards or the unintentional concentration of risks. SEC 

agrees with the report’s discussion that there may be reasons to take into 

account variations in national legal and market structures and conditions, 

including differences in economic development and enforcement 

authority. 

SEC also comments on a number of specific issues in the report. SEC 

noted that it does not share the view that international organizations 

“implement” international standards, nor should they have that authority.

Our report summarizes the international financial reform process, drawing 

a clear line between the development of international standards under the 

auspices of FSB or standard-setting bodies (or both) and the voluntary 

adoption of rules or policies consistent with these standards by 

jurisdictions, such as through legislation or regulations. SEC also noted 

that interconnections permitted disruptions to spread quickly across 

borders but was unsure that such interconnections increased systemic

risk as stated in our report. No single definition for systemic risk exists, 

but systemic risk has been viewed as the possibility that a single event 

could broadly affect the entire financial system, causing widespread 

losses rather than just losses at one or a few institutions. As we recently 

reported in January 2013, the 2007-2009 financial crisis illustrated the 

potential for systemic risk to be generated and propagated outside of the 

largest financial firms (such as by money market mutual funds), in part 

because of interconnections not only between firms but also between 

markets. SEC also noted the particular status of the accounting standard-
 

Page 50 GAO-14-261 International Financial Reforms

setting bodies. In particular, both IASB and the Financial Accounting 

Standards Board are independent, private-sector organizations. Although 

the IASB is an FSB member, the legitimacy of the accounting standards 

that these bodies set depends, among other things, on those bodies’ 

ability to set accounting standards free from political interference. We 

have added a clarifying note in figure 4 in appendix II to reflect this 

comment. Finally, SEC noted that our report uses the term “shadow 

banking” and it is not appropriate to use this term to refer to market-based 

financing, which serves a credit intermediation function. Our report 

discusses shadow banking, because it is one of the G20 financial reform 

commitments—expanding the regulatory perimeter, including 

strengthening of the regulation and oversight of shadow banking. Our 

report does not define shadow banking but rather uses FSB’s Policy 

Framework for Addressing Shadow Banking Risks in Securities Lending 

and Repos (see appendix III, table 7) as a reference document. 

According to FSB, this policy was intended to help strengthen oversight 

and regulation of the shadow banking system. The policy notes that the 

“shadow banking system” can broadly be described as “credit 

intermediation involving entities and activities (fully or partially) outside 

the regular banking system.” Therefore, the use of the term shadow 

banking is appropriate for this report.

We are sending copies of this report to CFTC, FDIC, the Federal 

Reserve, OCC, SEC, and Treasury, interested congressional committees 

and members, and others. This report will also be available at no charge 

on our website at http://www.gao.gov. 

Should you or your staff have questions concerning this report, please 

contact me at (202) 512-8678 or clowersa@gao.gov. Contact points for 

our Offices of Congressional Relations and Public Affairs may be found 

on the last page of this report. Key contributors to this report are listed in 

appendix VII. 

A. Nicole Clowers

Director, Financial Markets and Community Investment
Appendix I: Objectives, Scope, and 

Methodology

Page 51 GAO-14-261 International Financial Reforms

This report reviews the (1) U.S. role in the international financial reform 

efforts, including the development of international financial standards, and 

(2) implementation status of recent international financial reforms in the 

United States relative to other jurisdictions and challenges or concerns 

that any uneven progress could present.

To address the first objective, we reviewed and analyzed declarations, 

communiqués, and other statements issued by the G20 leaders about 

their agreed-to commitments to reform financial regulations. In addition, 

we reviewed and analyzed reports or other documents issued since 2008 

by various international bodies—including the Financial Stability Board 

(FSB), International Monetary Fund (IMF), Basel Committee on Banking 

Supervision, International Organization of Securities Commissions, 

Committee on Payment and Settlement Systems, and International 

Accounting Standards Board—about their role in implementing the G20 

reforms, such as through the development of international financial 

standards, or monitoring the implementation status of the G20 reforms at 

the international and jurisdictional levels. We also reviewed press 

statements, policy documents, or other material issued by U.S. and other 

jurisdictions about their work to support the G20 financial reforms. We 

interviewed U.S. financial regulatory authorities, including the Commodity 

Futures Trading Commission (CFTC), Federal Deposit Insurance 

Corporation (FDIC), Board of Governors of the Federal Reserve System, 

Office of the Comptroller of the Currency (OCC), Securities and 

Exchange Commission (SEC), and Department of the Treasury—and 

FSB and IMF officials about their role in the G20 reform efforts, including 

implementation challenges. To gain insights about the G20 financial 

reforms and associated implementation challenges, we also reviewed 

numerous studies by academics and other experts and interviewed four 

professors in the fields of law, economics, and political science and two 

industry associations representing banks or over-the-counter (OTC) 

derivatives market participants. We judgmentally selected these parties 

based on studies or other material they issued on the G20’s international 

financial reforms, and the results are not generalizable.

To address the second objective, we reviewed, analyzed, and 

summarized progress reports, peer reviews, surveys, or other material 

prepared by FSB and international bodies, including the Basel Committee 

on Banking Supervision and IMF, on the implementation status of the 

G20 reforms in the priority areas at the jurisdictional level. Similarly, we 

also reviewed and analyzed FSB’s annual surveys of its member 

jurisdictions on their implementation status of the G20 reforms in the 

nonpriority areas. We reviewed the accuracy of U.S. responses to 

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 52 GAO-14-261 International Financial Reforms

questionnaires administered by FSB or a standard setting body that 

covered U.S. progress implementing Basel II, 2.5, and III and the G20’s 

OTC derivatives reforms, including the requirements for OTC derivatives 

transactions to be centrally cleared, traded on organized trading 

platforms, and reported to trade repositories, and we generally found the 

U.S. responses were accurate. We also asked audit offices of 14 

jurisdictions that are members of FSB—and which are participating in an 

International Organization of Supreme Audit Institutions working group on 

financial reforms—to do the same for their regulators’ responses. Finally, 

as identified above, we interviewed officials representing U.S. regulators, 

FSB, IMF, industry associations, and academics about challenges or 

concerns that uneven implementation of the G20 financial reforms across 

jurisdictions could present.

We conducted this performance audit from March 2013 to April 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: The International Financial 

Architecture and International Bodies

Page 53 GAO-14-261 International Financial Reforms

As shown in figure 4, a variety of international bodies are part of the 

international financial architecture.

Figure 4: International Bodies Included in the International Financial Architecture

Note: This figure is not meant to be comprehensive. Some bodies have relationships to one another 

that are not depicted here.

a

The Monitoring Board of the IFRS Foundation oversees the work of the International Accounting 

Standards Board (IASB). IASB carries out the IFRS Foundation’s stated objectives of developing a 

single set of high-quality, understandable, enforceable, and globally accepted International Financial 

Reporting Standards (IFRS). The members of the Monitoring Board are the Growth and Emerging 

Markets Committee of the International Organization of Securities Commissions, the Financial 

Services Agency of Japan, the European Commission, and the U.S. Securities and Exchange 

Commission. Additional members of the Monitoring Board selected in January 2014 are the 

Appendix II: The International Financial 

Architecture and International Bodies
Appendix II: The International Financial 

Architecture and International Bodies

Page 54 GAO-14-261 International Financial Reforms

Comissão de Valores Mobiliários of Brazil and the Financial Services Commission of Korea. The 

Basel Committee on Banking Supervision is an observer. Although IASB--an independent, privatesector organization--is an FSB member, a US regulator has noted that the legitimacy of the 

accounting standards that IASB sets depends, among other things, on its ability to set accounting 

standards free from political interference.

b

In addition to the international bodies discussed in the background 

section of the report (such as the Financial Stability Board, Basel 

Committee on Banking Supervision, International Organization of 

Securities Commissions, International Association of Insurance 

Supervisors, and the International Monetary Fund), other international 

bodies comprising the international financial architecture include the 

following:

The Organisation for Economic Co-operation and Development provides secretariat services for the 

Financial Action Task Force.

The Bank for International Settlements provides a forum for international 

cooperation among central banks and within financial and supervisory 

communities. Its members as of July 2013 are central banks or monetary 

authorities of 59 economies plus the European Central Bank. The Bank 

for International Settlements acts as a bank for central banks; publishes 

economic and monetary research; and acts as a counterparty for central 

banks in their financial transactions and as agent or trustee in connection 

with international financial operations. It also hosts other international 

financial organizations and groups, such as FSB and the Basel 

Committee.

The Committee on the Global Financial System is a central bank forum to 

monitor issues relating to financial markets and systems. It works to 

identify and assess potential sources of stress in global financial markets.

The Financial Action Task Force is an organization of 36 jurisdictions that 

sets standards and promotes effective implementation of legal, 

regulatory, and operational measures for combating money laundering, 

terrorist financing, and other related threats to the integrity of the 

international financial system.

The Organisation for Economic Co-operation and Development is a 

membership organization of 34 countries that promotes economic growth 

and employment among its members, while maintaining financial stability. 

It has cooperated with the G20 in areas related to promoting economic 

Bank for International 

Settlements

Committee on the Global 

Financial System

Financial Action Task 

Force

Organisation for Economic 

Co-operation and 

Development
Appendix II: The International Financial 

Architecture and International Bodies

Page 55 GAO-14-261 International Financial Reforms

growth, and in areas of financial regulation such as developing principles 

on consumer protection. It also is involved in global tax standards 

development.

The World Bank, established in 1944, provides financial and technical 

assistance to developing countries with the goals of ending extreme 

poverty and promoting shared prosperity by fostering income growth of 

the bottom 40 percent of every country. Headquartered in Washington, 

D.C., with 10,000 staff in 120 offices worldwide, the bank provides 

financial assistance products and services and engages in a range of 

knowledge-sharing activities.

The Monitoring Board of the IFRS Foundation oversees the work of the

International Accounting Standards Board (IASB). As noted in the 

background section of this report, the IASB carries out the IFRS 

Foundation’s stated objectives of developing a single set of high-quality, 

understandable, enforceable, and globally accepted accounting 

standards. IASB members are responsible for the development and 

publication of International Financial Reporting Standards (IFRS). The 

members of the Monitoring Board are the Growth and Emerging Markets 

Committee of the International Organization of Securities Commissions, 

the Financial Services Agency of Japan, the European Commission, and 

the U.S. Securities and Exchange Commission. Additional members of 

the Monitoring Board selected in January 2014 are the Comissão de 

Valores Mobiliários of Brazil and the Financial Services Commission of 

Korea. The Basel Committee on Banking Supervision is an observer.

The World Bank

The Monitoring Board of 

the IFRS Foundation
Appendix III: Reform Areas and Objectives of 

the Group of Twenty, Standards Developed by 

International Bodies, and U.S. Agencies’ 

Participation

Page 56 GAO-14-261 International Financial Reforms

The Group of Twenty (G20) leaders have committed to undertake a broad 

range of financial regulatory reforms at the various summits held since 

2008. The G20 leaders generally have tasked their national authorities—

along with the Financial Stability Board (FSB), standard-setting bodies, 

such as the Basel Committee on Banking Supervision, the International 

Organization of Securities Commissions (IOSCO), International 

Association of Insurance Supervisors (IAIS), and other bodies—with 

converting their broad financial reform commitments into more specific 

standards (including policies, principles, practices, or guidance). Although 

the standards are developed under the auspices of FSB or standard 

setting bodies (or both), the work of many of these entities largely is 

carried out by staff of finance ministries, central banks, and financial 

sector regulators of the member institutions. As shown in table 7, various 

U.S. agencies have participated in the development of standards needed 

to implement the G20 reform commitments, and all have been involved in 

their review. 

Appendix III: Reform Areas and Objectives of 

the Group of Twenty, Standards Developed 

by International Bodies, and U.S. Agencies’ 

Participation
Appendix III: Reform Areas and Objectives of 

the Group of Twenty, Standards Developed by 

International Bodies, and U.S. Agencies’ 

Participation

Page 57 GAO-14-261 International Financial Reforms

Table 7: G20 Reform Objectives, Selected International Standards, and U.S. Participation 

G20 reform area and 

objective Standard

International body 

responsible for standard a U.S. participant(s) in standard 

development

1. Banking:

b

• Increasing banks’ 

resilience to shocks

• Strengthen banks’ risk 

management practices

• Strengthening deposit 

insurance regimes

Basel capital framework, 

(Basel II, 2.5, III) (standards)

Basel Committee on Banking 

Supervision (Basel 

Committee)

• Board of Governors of the 

Federal Reserve System 

(Federal Reserve Board)

• Federal Deposit Insurance 

Corporation (FDIC)

• Federal Reserve Bank of New 

York

• Office of the Comptroller of the 

Currency (OCC)

Core principles for banking 

supervision (principles)

Basel Committee • FDIC

• OCC

Principles for the 

supervision of financial 

conglomerates (principles)

Joint Forum, Basel 

Committee 

• Federal Reserve Board

• National Association of 

Insurance Commissioners

• OCC

• Securities and Exchange 

Commission (SEC)

Principles for effective risk 

data aggregation and risk 

reporting (principles)

Basel Committee • Federal Reserve Bank of New 

York

• Federal Reserve Board

• OCC

Principles for the sound 

management of operational 

risk (principles)

Basel Committee • FDIC

• Federal Reserve Bank of 

Boston

• Federal Reserve Bank of New 

York

• Federal Reserve Board

• OCC

Principles for sound stress 

testing practices and 

supervision (principles)

Basel Committee • FDIC

• Federal Reserve Bank of New 

York

• OCC

• Office of Thrift Supervision

Core principles for effective 

deposit insurance systems

c

Basel Committee, 

International Association of 

Deposit Insurers 

• FDIC
Appendix III: Reform Areas and Objectives of 

the Group of Twenty, Standards Developed by 

International Bodies, and U.S. Agencies’ 

Participation

Page 58 GAO-14-261 International Financial Reforms

G20 reform area and 

objective Standard

International body 

responsible for standard a U.S. participant(s) in standard 

development

2. Over-the counter (OTC) 

Derivatives markets

b

• Central clearing of all 

standardized derivative 

products

• Trading on exchanges and 

electronic trading 

platforms, where 

appropriate

• Mandatory reporting to 

trade repositories

• Higher capital charges for 

noncentrally cleared 

derivatives and margin 

requirements for 

noncentrally cleared 

derivatives

Principles for financial 

market infrastructures 

(principles)

Committee on Payment and 

Settlement Systems (CPSS), 

International Organization of 

Securities Commissions 

(IOSCO) 

• Commodity Futures Trading 

Commission (CFTC)

• Federal Reserve Bank of New 

York

• Federal Reserve Board

• SEC 

Requirements for mandatory 

clearing

IOSCO • CFTC (Co-chair of Task Force 

on OTC Derivatives)

• SEC (Co-chair of Task Force 

on OTC Derivatives)

Report on trading of OTC 

Derivatives

IOSCO • CFTC (Co-chair of Task Force 

on OTC Derivatives)

• SEC (Co-chair of Task Force 

on OTC Derivatives)

Report on OTC derivatives 

data reporting and 

aggregation requirements

CPSS, IOSCO • CFTC (Co-chair)

• Federal Reserve Board

• Federal Reserve Bank of New 

York

• SEC 

Margin requirements for 

non-centrally cleared 

derivatives (principles)

Basel Committee, IOSCO • CFTC

• FDIC

• Federal Reserve Board

• OCC

• SEC 

3. Compensation Practices FSF principles for sound 

compensation practices 

(principles)

Financial Stability Forumd • Federal Reserve Bank of New 

York

 

• Federal Reserve Board

Implementing guidance for 

principles for sound

compensation practices 

(guidance)

Financial Stability Board 

(FSB) 

• Federal Reserve Board

4. Systemically Important 

Financial Institutions 

(SIFIs) and Resolution 

Regimes

• Reducing the moral hazard 

of SIFIs (i.e. ending “toobig-to-fail”) 

Reducing the moral hazard 

posed by systemically 

important financial 

institutions 

(recommendations)

FSB • FDIC

• Federal Reserve Board

• OCC
Appendix III: Reform Areas and Objectives of 

the Group of Twenty, Standards Developed by 

International Bodies, and U.S. Agencies’ 

Participation

Page 59 GAO-14-261 International Financial Reforms

G20 reform area and 

objective Standard

International body 

responsible for standard a U.S. participant(s) in standard 

developmentb

Key attributes of effective 

resolution regimes for 

financial institutions 

(principles)

FSB • CFTC

• FDIC

• Federal Reserve Bank of New 

York

• OCC

• Department of the Treasury 

(Treasury) 

Principles for the 

supervision of financial 

conglomerates (principles)

Joint Forum • Federal Reserve Board

• OCC

• SEC 

Policy measures for global 

systemically important 

financial institutions 

(including global 

systemically important 

banks [G-SIBs]) (framework)

FSB, Basel Committee • FDIC

• Federal Reserve Board

• OCC

• Treasury

Framework for domestic 

systemically important 

banks D-SIBs (principles)

FSB, Basel Committee • FDIC

• Federal Reserve Board

• OCC

Framework for global 

systemically important 

insurers (G-SIIs) (principles) 

International Association of 

Insurance Supervisors (IAIS) 

 

• Treasury (Federal Insurance 

Office [FIO])

Insurance core principles 

(principles) 

IAIS • Treasury (FIO)

5. Shadow Banking

• Expanding the regulatory 

perimeter including 

strengthening of the 

regulation and oversight of 

shadow banking

Policy framework for 

addressing shadow banking 

risks in securities lending 

and repos (guidance)

FSB • Federal Reserve Board

• SEC 

Policy framework for 

strengthening oversight and 

regulation of shadow 

banking entities (guidance)

FSB • Federal Reserve Bank of New 

York

• SEC 

• Treasury

6. Hedge funds

• Registration, appropriate 

disclosure, and oversight

• International information 

sharing

• Enhancing counterparty 

risk management

IOSCO report on hedge fund 

oversight including six highlevel principles on regulation 

of hedge funds (principles)

IOSCO • CFTC

• SEC 

Capital requirements for 

bank exposures to central 

counterparties (standards)

Basel Committee • FDIC

• OCC

Basel Committee guidance 

on banks’ interactions with 

highly leveraged institutions 

(guidance)

Basel Committee • FDIC

• Federal Reserve Bank of New 

York

• Federal Reserve Board

• OCC
Appendix III: Reform Areas and Objectives of 

the Group of Twenty, Standards Developed by 

International Bodies, and U.S. Agencies’ 

Participation

Page 60 GAO-14-261 International Financial Reforms

G20 reform area and 

objective Standard

International body 

responsible for standard a U.S. participant(s) in standard 

development

7. Securitization

b

• Enhance counterparty risk 

management

• Strengthening of 

supervisory requirements 

or best practices for 

investment in structured 

products

• Enhance disclosure of 

securitized products

IOSCO recommendations in 

report on global 

developments in 

securitization regulations 

(principles) 

IOSCO • SEC

Enhancements to the Basel 

II framework (standards) 

Basel Committee • OCC

Good practices in relation to 

investment managers ́ due 

diligence when investing in 

structured finance 

instruments (guidance) 

IOSCO • SEC

Suitability requirements for 

distribution of complex 

financial products 

(guidance)

IOSCO • SEC

Principles for ongoing 

disclosure for asset-backed 

securities (principles)

IOSCO • SEC

8. Macroprudential 

Frameworks and Tools

• Establishing regulatory 

framework for 

macroprudential oversight

• Enhancing system-wide 

monitoring and the use of 

macroprudential 

instruments

• Improved cooperation 

between supervisors and 

central banks

Operationalizing the 

selection and application of 

macroprudential instruments 

(guidance) 

Committee on the Global 

Financial System

• Federal Reserve Bank of New 

York

• Federal Reserve Board

IMF paper on 

macroprudential policy, an 

organizing framework 

(guidance)

International Monetary Fund 

(IMF)

• N/A (IMF staff)

Good practice principles on 

supervisory colleges 

(guidance and principles)

Basel Committee • FDIC

• OCC

9. Credit Rating Agencies 

(CRA)

• Enhancing regulation and 

supervision of CRAs

• Reducing reliance on credit 

ratings

Code of conduct 

fundamentals for credit 

rating agencies (standard)

IOSCO • SEC 

Principles for reducing 

reliance on CRA Ratings 

(principles) 

FSB • FDIC

• SEC 

10. Accounting Standards

• Convergence by key global 

accounting standards 

bodies

International Financial 

Reporting Standards (IFRS) 

(standard)

U.S. Generally Accepted 

Accounting Principles

IFRS Foundation

Financial Accounting 

Foundation

• Financial Accounting 

Standards Board 
Appendix III: Reform Areas and Objectives of 

the Group of Twenty, Standards Developed by 

International Bodies, and U.S. Agencies’ 

Participation

Page 61 GAO-14-261 International Financial Reforms

Source: GAO summary of information from U.S. federal agencies and international bodies

Notes: FSB = Financial Stability Board; Basel Committee = Basel Committee on Banking Supervision; 

IOSCO = International Organization of Securities Commissions; IADI = International Association of 

Deposit Insurers; IAIS = International Association of Insurance Supervisors; IMF = International 

Monetary Fund; OECD = Organisation for Economic Cooperation and Development. 

a

Standard refers to standards, guidance, frameworks, and principles.

b

U.S. federal agencies review and provide input on all draft standards, principles, and other guidance 

produced by international bodies of which they are members or that concern relevant reform areas. 

This column describes U.S. participation on committees or working groups developing specific 

standards. 

c

The Dodd-Frank Act eliminated the Office of Thrift Supervision, which chartered and supervised 

federally chartered savings institutions and savings and loan holding companies. Rulemaking 

authority previously vested in the Office of Thrift Supervision was transferred to OCC for savings 

associations and to the Federal Reserve Board for savings and loan holding companies. Supervisory 

authority was transferred to OCC for federal savings associations, to FDIC for state savings 

associations, and to the Federal Reserve Board for savings and loan holding companies and their 

subsidiaries, other than depository institutions.

d

The Financial Stability Forum was reconstituted as the Financial Stability Board by the G20 in 2009.

G20 reform area and 

objective Standard

International body 

responsible for standard a U.S. participant(s) in standard 

development

11. Financial Markets

b

• Enhancing market integrity 

and efficiency

• Address risks posed by 

high frequency trading and 

dark liquidity

• Enhanced market 

transparency in commodity 

markets

Report on regulatory issues 

raised by the impact of 

technological changes on 

market integrity and 

efficiency (guidance) 

IOSCO • SEC 

Report on principles for dark 

liquidity (guidance, 

principles)

IOSCO • SEC

Legal entity identifier 

(standard)

Legal Entity Identifier 

Regulatory Oversight 

Committee

• CFTC

• FDIC

• Federal Reserve Board

• OCC

• SEC 

• Treasury (Office of Financial 

Research, Chair)

Principles for the regulation 

and supervision of 

commodity derivatives 

markets (principles)

IOSCO • CFTC (Co-chair)

12. Consumer Protection

Improve consumer finance 

protection

G20 high-level principles on 

financial consumer 

protection

FSB, Organisation for 

Economic Co-operation and 

Development (OECD)

• Consumer Financial Protection 

Bureau

• Treasury 
Appendix IV: Implementation Status of the 

Group of Twenty’s Reform Commitments 

Reported by Select Member Jurisdictions of 

the Financial Stability Board

Page 62 GAO-14-261 International Financial Reforms

The Financial Stability Board (FSB) is responsible for coordinating the 

implementation of the Group of Twenty’s (G20) financial reform 

commitments and reporting implementation progress to the G20. In 

collaboration with standard setting bodies, FSB established a framework 

in 2011 to monitor and report on the implementation of the G20 financial 

reform commitments.1 FSB has selected priority reform areas that 

undergo more intensive monitoring and detailed reporting than other 

reform areas, and the list of priority areas is reviewed annually by FSB 

and revised as needed.2 Priority reform areas are selected based on the 

importance of their consistent and comprehensive implementation toward

global financial stability. For each priority area, an FSB working group or 

a standard setting body is responsible for monitoring implementation 

progress and periodically preparing a progress report.3 Currently, FSB’s 

priority areas are (1) the Basel II, 2.5, and III framework; (2) OTC 

derivatives market reforms; (3) compensation practices; (4) policy 

measures for global SIFIs; (5) resolution regimes; and (6) shadow 

banking.4

For the G20 financial reform commitments in the nonpriority areas, FSB 

generally monitors their implementation less intensively, primarily through 

 

1

FSB, A Coordination Framework for Monitoring the Implementation of Agreed G20/FSB 

Financial Reforms (Oct. 18, 2011). FSB’s implementation monitoring covers only the 

G20’s financial reform commitments made in the aftermath of the global financial crisis, 

unless otherwise mandated by the G20.

2

FSB’s Standing Committee on Standards Implementation is responsible for proposing 

changes to the list annually.

3

Such reports are to include information that (1) is collected and reported frequently, (2) 

provides regular country-by-country implementation details, (3) may be relevant for 

assessing implementation progress, (4) highlights issues and lessons of experience that 

implementation has raised for the authorities and market participants, and (5) provides 

potential recommendations to address major impediments to, or gaps in, implementation.

4

We do not report separately on the implementation progress for resolution regimes and 

shadow banking. First, we discuss implementation progress of resolution regimes but only 

for SIFIs. Second, FSB noted that progress for shadow banking will be reported once 

implementation is sufficiently under way. For the time being, FSB is reporting on those 

elements of shadow banking that already are under way under nonpriority areas.

Appendix IV: Implementation Status of the 

Group of Twenty’s Reform Commitments 

Reported by Select Member Jurisdictions of 

the Financial Stability Board
Appendix IV: Implementation Status of the 

Group of Twenty’s Reform Commitments 

Reported by Select Member Jurisdictions of 

the Financial Stability Board

Page 63 GAO-14-261 International Financial Reforms

annual surveys of its member jurisdictions.5

Figure 5 provides country profiles that summarize information on the 

implementation status of selected G20 financial reform commitments by 

the 11 countries that are home to global systemically important banks, as 

identified by FSB. The country profiles include information on the 

implementation status of G20 reform commitments in priority and 

nonpriority areas. The profiles also provide examples of how countries 

have implemented certain nonpriority reforms, such as through legislative 

or regulatory changes. These examples are excerpts taken from FSB’s 

2013 surveys completed by the jurisdictions and reflect the differences in 

the approaches taken by the jurisdictions. Finally, each profile includes 

information on a country’s population, gross domestic product (GDP), and 

global competitiveness index.

FSB’s 2013 survey of its 

member jurisdictions covered 27 G20 financial reform commitments. The 

survey data are self-reported by FSB member jurisdictions, and FSB 

generally does not evaluate the survey responses to verify the accuracy 

or assess the effectiveness of implementation.

6

 

5

For the G20 reform commitments in the nonpriority areas, implementation monitoring is 

undertaken by FSB’s Implementation Monitoring Network. In large part, FSB has 

monitored progress through annual surveys of its member jurisdictions, with the first 

survey completed in 2010. In some cases, standard setting bodies may collect and report 

implementation information to FSB. In its 2010 and 2011 surveys, FSB generally covered 

all of the G20 reform commitments. After adopting its coordination framework in 2011, 

FSB has sought to exclude from the survey the G20 reform commitments on its priority 

area list. 

6

Developed by the World Economic Forum, the global competitiveness index is a 

comprehensive tool designed to measure the microeconomic and macroeconomic 

foundations of national competitiveness. The index scale ranges from 1 to 7 (with 7 the 

highest score), and 148 economies are ranked based on their score. 
Appendix IV: Implementation Status of the 

Group of Twenty’s Reform Commitments 

Reported by Select Member Jurisdictions of 

the Financial Stability Board

Page 64 GAO-14-261 International Financial Reforms

Figure 5: Country Profiles–China
Appendix IV: Implementation Status of the 

Group of Twenty’s Reform Commitments 

Reported by Select Member Jurisdictions of 

the Financial Stability Board

Page 65 GAO-14-261 International Financial Reforms

Figure 6: Country Profiles–France
Appendix IV: Implementation Status of the 

Group of Twenty’s Reform Commitments 

Reported by Select Member Jurisdictions of 

the Financial Stability Board

Page 66 GAO-14-261 International Financial Reforms

Figure 7: Country Profiles–Germany
Appendix IV: Implementation Status of the 

Group of Twenty’s Reform Commitments 

Reported by Select Member Jurisdictions of 

the Financial Stability Board

Page 67 GAO-14-261 International Financial Reforms

Figure 8: Country Profiles–Italy 
Appendix IV: Implementation Status of the 

Group of Twenty’s Reform Commitments

Reported by Select Member Jurisdictions of 

the Financial Stability Board

Page 68 GAO-14-261 International Financial Reforms

Figure 9: Country Profiles–Japan
Appendix IV: Implementation Status of the 

Group of Twenty’s Reform Commitments 

Reported by Select Member Jurisdictions of 

the Financial Stability Board

Page 69 GAO-14-261 International Financial Reforms

Figure 10: Country Profiles–Netherlands
Appendix IV: Implementation Status of the 

Group of Twenty’s Reform Commitments 

Reported by Select Member Jurisdictions of 

the Financial Stability Board

Page 70 GAO-14-261 International Financial Reforms

Figure 11: Country Profiles–Spain 
Appendix IV: Implementation Status of the 

Group of Twenty’s Reform Commitments 

Reported by Select Member Jurisdictions of 

the Financial Stability Board

Page 71 GAO-14-261 International Financial Reforms

Figure 12: Country Profiles–Sweden
Appendix IV: Implementation Status of the 

Group of Twenty’s Reform Commitments 

Reported by Select Member Jurisdictions of 

the Financial Stability Board

Page 72 GAO-14-261 International Financial Reforms

Figure 13: Country Profiles–Switzerland
Appendix IV: Implementation Status of the 

Group of Twenty’s Reform Commitments 

Reported by Select Member Jurisdictions of 

the Financial Stability Board

Page 73 GAO-14-261 International Financial Reforms

Figure 14: Country Profiles–United Kingdom (UK)
Appendix IV: Implementation Status of the 

Group of Twenty’s Reform Commitments 

Reported by Select Member Jurisdictions of 

the Financial Stability Board

Page 74 GAO-14-261 International Financial Reforms

Figure 15: Country Profiles–United States (US)
Appendix V: Comments from the Department 

of the Treasury

Page 75 GAO-14-261 International Financial Reforms

Appendix V: Comments from the Department 

of the Treasury
Appendix VI: Comments from the Securities 

and Exchange Commission

Page 76 GAO-14-261 International Financial Reforms

Appendix VI: Comments from the Securities 

and Exchange Commission
Appendix VI: Comments from the Securities 

and Exchange Commission

Page 77 GAO-14-261 International Financial Reforms
Appendix VII: GAO Contact and Staff 

Acknowledgments

Page 78 GAO-14-261 International Financial Reforms

A. Nicole Clowers, (202) 512-8678, clowersa@gao.gov

In addition to the contact named above, Richard Tsuhara (Assistant 

Director), Rudy Chatlos, Catherine Gelb, Camille Keith Jennings, Thomas 

McCool, Thomas Melito, Marc Molino, Akiko Ohnuma, Barbara 

Roesmann, and Jessica Sandler made key contributions to this report.

Appendix VII: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(250709)
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